Aehr Test Systems, Inc. (AEHR) Earnings Call Transcript & Summary

Good day. Welcome to the Aehr Test Systems Fiscal 2026 Fourth Quarter and Full Year Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Jim Byers at PondelWilkinson, Investor Relations. Jim, you may begin.

Thank you, operator. Good afternoon, and welcome to Aehr Test Systems Fiscal 2026 Fourth Quarter and Full Year Financial Results Conference Call. With me on today's call are Aehr Test Systems' President and Chief Executive Officer, Gayn Erickson; and Chief Financial Officer, Chris Siu. Before I turn the call over to Chris and Gayn, I'd like to cover a few quick items. This afternoon, right after market close, Aehr Test issued a press release announcing its fiscal 2026 fourth quarter and full year results. That release is available on the company's website at aehr.com. This call is being broadcast live over the Internet for all interested parties, and the webcast will be archived on the Investor Relations page of the company's website. And I'd like to remind everyone that on today's call, management will be making forward-looking statements that are based on current information and estimates and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These factors are discussed in the company's most recent periodic and current reports filed with the SEC. These forward-looking statements, including guidance provided during today's call, are only valid as of this date, and Aehr Test Systems undertakes no obligation to update the forward-looking statements. Now with that said, I'd like to turn the call over to Gayn Erickson, President and CEO.

Thanks, Jim, and good afternoon, everyone, and welcome to our fiscal '26 fourth quarter and full year earnings conference call. I'll start with an update on the key markets driving our business, including the strong demand we're seeing in the AI and data center infrastructure markets as well as the significant progress we made this year in diversifying and expanding our end markets. Chris will then go over our -- and review our financial results and open up the call for questions. We're very pleased with our fiscal fourth quarter, which exceeded consensus Street expectations and capped a year of significant bookings and revenue diversification for Aehr. Record quarterly bookings, a very strong and record backlog and growing demand across AI processors, silicon photonics and power semiconductors for both our wafer-level and package-level burn-in solutions position us well for significant growth in '27 and moving forward, fiscal '27, that is. With strong momentum and a record backlog heading into fiscal '27, we're expecting revenue of between $130 million and $150 million, representing 2.6x to 3x the just completed fiscal '26 revenue. Non-GAAP pretax profitability at these levels is expected to come in between 18% and 22%. With current customer forecasts that we're seeing across our wafer-level and packaged-level burn-in platforms, we see the opportunity to increase our revenue guidance even higher as additional orders materialize. We believe we're not capacity limited even at the $150 million revenue levels. To illustrate the progress we've made in diversifying into additional high-growth markets, just 2 years ago, over 95% of our business was tied to silicon carbide for electric vehicles, whereas today, almost 95% of our fiscal year '26 revenue came from markets not electric vehicle silicon carbide. Reliability and production wafer-level burn-in screening for AI accelerators, CPUs and network processors were our fastest-growing markets this year, representing approximately 71% of our total annual revenue. Optical device test and burn-in for data center infrastructure transceivers, chip-to-chip I/O and hard disk drives accounted for another 20%. We expect both of these markets to grow significant in fiscal 2027. And we're seeing encouraging signs of recovery in the silicon carbide market as well as new growth opportunities for power semiconductors such as in gallium nitride and even silicon-based power MOSFETs used in both automotive and AI data center applications. So let me provide an update on several of the key markets and customer initiatives. And I'll start with wafer-level burn-in. Demand from AI-related applications continues to accelerate. Our lead AI processor wafer-level burn-in customer is significantly ramping their products, driving an increase in forecasted capacity needs for our FOX systems and proprietary WaferPak full-wafer contactors this year and over the next few years. This past year, they've ordered our fully automated WaferPak Aligners to integrate with their installed base, doubled their systems from us and are forecasting significant increases in wafer allocation from their foundry this year and into the future. This has been a challenge to their growth over the last year. We're happy to see them move all production burn-in screening to wafer-level burn-in on our systems this past year. They no longer need to perform any system-level screening of their products. This customer sees Aehr as a critical supplier, and we're working to ensure we can meet all their capacity needs as they forecast significant growth in system purchases and WaferPaks this year and over the next few years. In addition, we're engaged with additional AI processor customers who are evaluating wafer-level burn-in to improve their product reliability and reduce yield loss from production burn-in of their devices later in the manufacturing process. This includes one of our largest package-level burn-in customers who is now asking us about a wafer-level burn-in evaluation for future production of one of their AI accelerators and CPUs. This is in parallel with ensuring we can meet their package-level burn-in needs with our Sonoma systems. A key advantage of our proprietary WaferPak Contactor technology is its ability to manage individual die temperatures, enabling significantly better thermal management than conventional package-level approaches. Our systems can process up to 1/4 of a wafer at a time with as many as nine wafers tested in parallel, delivering a compelling combination of throughput and cost efficiency. So let me provide an update on our wafer-level burn-in evaluation with a major supplier of AI accelerators, CPUs and network processors. We're excited to report that we successfully completed the benchmark testing of our wafer-level burn-in solution on one of their processors, achieving results that exceeded their expectations and in their words, produced results better than they can get at package-level. This top-tier AI processor supplier has now expressed interest in moving to pilot production test validation at their semiconductor contract manufacturer in Taiwan for their current high-volume device, which we just completed the benchmark on. Originally, this benchmark was to evaluate wafer-level burn-in for their next-generation device. Instead, they indicated that based on results they -- based on the results, they're interested to pull this device in and to consider wafer-level burn-in on this current device as well. They told us this current device is expected to continue ramping and achieve significant volumes over the next year or more. In addition, they also requested that we evaluate a second device in parallel. The potential revenue opportunity from one of these devices is significant to Aehr in terms of near- and long-term revenue streams related to the wafer-level burn-in systems and proprietary Aehr WaferPak contactors. Turning to wafer-level burn-in for silicon photonics devices. As we have anticipated for the last year, silicon photonics devices and the need for production burn-in are now seeing strong momentum as AI data center architectures increasingly rely on optical I/O and high-speed optical interconnects. Our lead silicon photonics customer is ramping with follow-on orders over the past year and more already in this fiscal year for fully automated wafer-level burn-in systems powering AI optical I/O and data center interconnects. These systems are fully integrated with their automated wafer handling equipment, enabling fully automated high-volume production burn-in with hands-free operation using automatic guided vehicles marking another important milestone with this long-term customer. In addition, our newest major silicon photonics customer, a global leader in networking products and solutions has provided us with a forecast for additional systems this calendar year as it ramps capacity support next-generation hyperscale data center deployments. This customer first engaged with us just last November and has since ordered 2 of our 9 wafer FOX test cells and 2 of our FOX-NPs. This engagement progress -- progressed quickly from initial contact to their first order and our first delivery of fully integrated test cell. We believe our sales process is shortening over time as our wafer-level burn-in solutions are becoming more pervasive across multiple industries, customers and countries. We believe the silicon photonics and optical test and burn-in market has substantial growth potential and can be a meaningful long-term growth driver for Aehr. So now let me share some highlights of our progress in power semiconductors and wafer-level burn-in in the past year. We completed more than a dozen designs for gallium nitride WaferPaks, which are now being sampled by potential customers. Many, if not all, are expected to move to volume production on our wafer-level burn-in systems, driving the need for systems and WaferPaks this year and going forward. We also just completed the first -- the world's first 300-millimeter GaN wafer-level burn-in solution using our high-voltage WaferPaks to stress and test the critical high-temperature reverse bias test needed to screen for GaN MOSFET defects in production. Just recently, we closed the sale of our first FOX system for a silicon MOSFET wafer-level burn-in application. Prior to this, customers had purchased our FOX wafer-level burn-in systems only for non-silicon MOSFETs such as silicon carbide and gallium nitride. We're working with this customer to determine test times and quality screening modes that we hope will lead to production burn-in capacity needs as the customer has indicated. We also captured our first silicon carbide customer in Taiwan. This customer works closely with several automotive manufacturers in Taiwan and China as well as other international companies. Securing this win was especially important to us because they chose Aehr over SEMI, a Chinese company that recently reincorporated in Malaysia as NEXUSTEST for their silicon carbide wafer-level burn-in products. As some of you know, Aehr Test is currently suing SEMI NEXUSTEST for patent infringement of their silicon carbide-focused wafer-level burn-in system. We believe they're violating our IP and patents that we hold in many countries around the world, including China, Taiwan, Japan, Korea, Singapore, the EU and the United States. We were chosen over SEMI due to technical superiority, cost and our reputation in the automotive industry for production wafer-level burn-in of silicon carbide devices for EVs. We are seeing encouraging signs of recovery in the silicon carbide power semiconductors and actively engaged to meet the wafer-level burn-in needs of several of the world's largest automotive OEM manufacturers, the car and EV suppliers and several of their silicon carbide suppliers for their new electric vehicles. We also announced today that we received approximately $8 million in new orders in just the last month for silicon carbide wafer-level burn-in WaferPaks as global electric vehicle programs accelerate. These include expanded production orders from our lead silicon carbide customer for WaferPak full-wafer contactors and a key order directly from one of the largest automotive companies in the world for multiple WaferPaks to be used in the qualification of silicon carbide devices from suppliers for the new generation of electric vehicles using Aehr's FOX wafer-level burn-in systems. This year, we expect renewed demand for both silicon carbide and GaN power semiconductor test and burn-in driven by automotive electrification and AI data center power infrastructure. Let me talk a little bit about wafer-level burn-in for memory. We also continue to pursue opportunities in memory, including NAND flash and potential high-bandwidth memory DRAM applications as part of our wafer-level burn-in solutions road map. The growth of these 2 memory markets may be stronger than ever with massive capacity increases planned for this decade. With our wafer-level burn-in benchmark with a global leader in NAND flash completed, we're in discussions on how to move forward. As we said last quarter, we hope to close on discussions about test system specifications needed for next-generation flash memories and in particular, their high-bandwidth flash devices which would lead to a development agreement to supply systems and WaferPaks to them over a 12- to 18-month deployment -- development of our new memory-optimized Blades for our FOX-XP and NP multi-wafer test and burn-in platform. We're also in ongoing discussions with other key memory suppliers that produce high-bandwidth memory the new DRAM standard used in AI GPUs as well as standard DRAM and flash memories to align our solutions with the production needs of these companies, new capacity coming online. As we've noted before, this is a key focus for Aehr year with the goal of reaching an agreement with these customers to develop the enhancements needed to extend our FOX system into these markets. We believe this market could drive orders in fiscal 2027 with ramps in fiscal 2028. Now turning to package-level burn-in. Our package-level burn-in business for AI processors also gained momentum over the year, highlighted by record follow-on production orders from our lead hyperscale customer for Sonoma systems supporting high-volume AI processor production burn-in. This customer is a premier large-scale data center provider and is forecasting a substantial expansion of Sonoma system purchases for a second device, which is twice the power per package is the first device that they're using Sonoma systems for today. As their current and next-generation devices ramp, we believe Sonoma Systems and consumables can become an increasingly important contributor to Aehr's revenue. This past year, we secured key new device wins on the Sonoma platform for high-temp operating life qualification. We're also engaged with multiple current and prospective customers for package-level reliability qualification, and production burn-in of AI accelerators, ASICs, network processors and also for edge AI processors for automotive and robotics, which represent significant opportunities for Aehr over the next few years. Recently, we introduced an enhanced Sonoma high-power configuration designed for next-generation CPUs, GPUs and high-performance network processors used in AI data center and communications applications. This enhanced system expands the Sonoma product family's capabilities with per device power up to 2,000 watts or more, increasing total system power capacity and improved device count scalability. It also includes an optional fully integrated AutoAligner and a high throughput Automated Loader/Unloader that enable completely hands-free operation in a production environment. Unlike traditional batch-flow burn-in, the Sonoma high-power configuration with its ALU is designed for continuous flow operation, enabling devices to begin testing immediately upon insertion. The automation and thermal systems run continuously, maximizing equipment utilization, throughput and return on investment for both engineering qualification and high-volume manufacturing environments. Our Sonoma systems deliver what we believe is the industry's lowest cost solution, enabling customers to transition seamlessly from early reliability characterization to full production burn-in and early life failure screening. This approach helps reduce costs, improve quality and accelerate time to market. To meet anticipated demand, we've been expanding manufacturing capacity for both our systems and consumables. That's both on the wafer-level and on the package-level. This additional capacity positions us to support expected customer ramp-ups and provides flexibility if demand exceeds our current outlook. Looking ahead, we're very excited about our position entering fiscal 2027. We have multiple customers who began production over the past 12 months and are now ramping up, creating the potential for meaningful follow-on demand for systems and consumables. With multiple customers entering or expanding production, a record backlog and additional opportunities under discussion for both wafer-level and package-level burn-in, we believe Aehr is well positioned for multiple years of strong revenue growth. With that, I'll turn it over to Chris.

Thank you, Gayn. Before I review our financial results, I would like to provide a brief update on the steps we're taking to expand our manufacturing capacity and consumer support infrastructure to support our growing backlog and future growth opportunities. As Gayn mentioned in the last conference call, we continue to scale our manufacturing capacity to support growing demand. In addition to our Fremont expansion, we began shipping Sonoma systems from one of our existing contract manufacturers in Southeast Asia. This adds capacity for more than 20 additional Sonoma systems per month and gives us greater flexibility as we scale to meet customer demand. With the recent record $41 million purchase order we received from our hyperscale customer in April, we are very active operationally as we build Sonoma systems to meet the customers' delivery schedule. This system is expected to be delivered this year to the OSAT of our hyperscale customer, which is based in Taiwan. Gayn also reported today that we successfully completed benchmark testing of our wafer-level burn-in solution with a major supplier of AI accelerators, CPUs and network processors. The testing was completed on one of their processors and achieved results that exceeded their expectations. This top-tier AI processor supplier has now expressed interest in moving to pilot production test validation for its current high-volume device. In anticipation of the next stage of this project, we have recently signed a new lease to expand our office in Hsinchu, Taiwan. This expansion will allow us to increase our local sales and customer support personnel, deepen our engagement with customers and ecosystem partners in the region and strengthen our ability to support future production ramps. With recent manufacturing capacity enhancements and an increased presence in Taiwan, we believe we are well positioned to support significant growth in both wafer-level and package-level burn-in systems as customers ramp production. Now to our financial results. Bookings in the fourth quarter of fiscal 2026 were $60.7 million, up more than 500% from $11.1 million in the prior year quarter. The increase was primarily driven by purchase orders for Sonoma package-level and FOX wafer-level burn-in systems, WaferPaks and burn-in module boards for AI and silicon photonics processor burn-in, partially offset by lower customer orders for silicon carbide WaferPaks. Backlog at year-end was a record $80.6 million, up from $15.2 million at the end of fiscal 2025. Subsequent to year-end, we received an additional $20 million in bookings during the 4-week transition period in the first 2 weeks of fiscal 2027. As a result, our effective backlog increased to approximately $100.6 million before taking into account minimal shipments during the transition period ended June 26, 2026, which is not part of fiscal year 2027. Turning to our Q4 performance. We're excited about our continued momentum in the artificial intelligence and data center markets. AI processors and silicon photonics burn-in accounted for more than 80% of our fourth quarter revenue compared with 56% in the prior year period. For the fourth quarter, we had 3 customers representing more than 10% of total revenue. Two of these customers target the AI market and the third focuses on the data center optical transceiver market. Revenue for the fourth quarter totaled $18.8 million, up 34% from $14.1 million in the prior year quarter. The increase was primarily driven by strong demand from AI and data center customers for our FOX systems, serial AutoAligners and WaferPaks. Contactor revenue was $5.8 million, representing 31% of our total fourth quarter revenue compared with 30% in the prior year period. This remains a sizable revenue stream for Aehr, driven by demand for new WaferPak designs as existing and new customers deploy FOX systems for additional device applications. Non-GAAP gross margin for the fourth quarter was 45%, up 1,000 basis points compared with 35% in the same period last year. The increase was primarily due to higher revenue levels, improved manufacturing capacity utilization and more favorable product mix. In the fourth quarter of fiscal 2025, our revenue was driven primarily by the sale of package-level burn-in systems, which had lower product margins. Non-GAAP operating expenses in the fourth quarter were $7.5 million compared with $5.4 million in the prior year quarter. The year-over-year increase was primarily attributable to higher employment costs as we added headcount to support our R&D projects as well as higher commissions related to record bookings from customers in the AI and data center markets. As an update on our patent litigation against SEMI in China, we continue to incur legal fees during the fourth quarter to support our claims. We are encouraged that the patent office in the Beijing District of the People's Republic of China has upheld 2 of our Chinese patents, which is critical to our litigation against SEMI. The case is still ongoing, and we anticipate incurring additional legal expenses in upcoming quarters as we continue to protect our intellectual property rights in China. Non-GAAP net income for the fourth quarter, excluding the impact of stock-based compensation and amortization of intangible assets was $3.6 million or $0.11 per diluted share, well above Street consensus. This compares with a non-GAAP net loss of $0.2 million or negative $0.01 per diluted share in the fourth quarter of fiscal 2025. Turning to the full year results. We reported revenue of $50 million, down 15% year-over-year. Full year non-GAAP gross margin was 38.5% compared with 44% in the prior year. Full year non-GAAP net income was $0.9 million or $0.03 per diluted share compared with non-GAAP net income of $4.6 million or $0.15 per diluted share in fiscal 2025. At the end of the fourth quarter, cash, cash equivalents and restricted cash totaled $116.5 million compared with $26.5 million at the end of fiscal 2025. During fiscal 2026, we raised approximately $100 million primarily through our ATM program, significantly strengthening our balance sheet. Although Aehr remains a capital-light company with only $2.1 million in capital expenditures in fiscal 2026, this enhanced financial position provides the working capital and flexibility to pursue larger customer opportunities and scale production to meet customer demand. Now I will share our guidance. For the fiscal year ending June 25, 2027, we expect total company revenue to be between $130 million and $150 million, representing expected year-over-year growth of approximately 160% to 200%. This outlook is based on the information available to us today, including our current backlog and anticipated customer demand. We continue to pursue additional orders from existing and prospective customers. We also expect pretax non-GAAP net income to be 18% to 22% of total revenue. Lastly, looking at our Investor Relations calendar, Aehr Test will be participating in 3 upcoming investor conferences over the next couple of months. We'll meet with investors virtually at the Needham 6th Annual Semiconductor and SemiCap 1x1 Conference on Wednesday, August 20. The following week, we'll meet with investors in person on Tuesday, August 26, at the Jefferies Technology Summit Conference in Chicago. On September 10, we'll meet with investors in person at the Lake Street Capital Annual BIG Ideas Growth Conference in New York City. We hope to see some of you at these conferences. This concludes our prepared remarks. Operator, we're now ready to take questions.

[Operator Instructions] And the first question today is coming from Christian Schwab from Craig-Hallum Capital Group.

Congratulations on the fantastic outlook. Gayn, I know you gave some description of revenue by application for the last fiscal year. For this, we're thinking about the $130 billion to $150 billion (sic) [ $130 million to $150 million ], not obviously asking by wafer-level burn-in or the Sonoma systems. But can you just give a rough idea of the assumption as far as product mix between AI chips, silicon photonics, power and if there'll be any memory revenue? It sounds like that's fiscal '28.

Yes. So we will. And the only challenge, of course, is we've never done that before. And so in reality, our ability to always predict. But in our current kind of roll-up right now, it's pretty similar to last year in terms of AI, 70-ish percent, the silicon photonics, maybe 15%, 20%, maybe in that same range. And then the power semiconductor and miscellaneous, is kind of the rest. But there's some pretty good -- and by the way, and I will state, we currently do not anticipate any memory revenue in even the $150 million number. So upside on any potential revenue from memory would be in addition to that. But right now, we're not assuming any of that. And the bulk of that, if not the majority of all of that range of $130 million to $150 million is coming from current customers. So not really even including -- I want to be -- give myself a little leeway of this new benchmark customer that we just completed with amazing results. That would be upside to that as well. So I think last year, I talked about the silicon carbide customers a year ago, we were all talking about how great it's going to be, and it's going to be a turnaround year. They didn't really give us really detailed forecast. So I think I shared a year ago, I'm kind of in a wait-and-see mode. I'll just believe it when I see the orders. This year seems a little bit more specific. We have some people with real numbers, some real forecast, some real targets. We're seeing the population of our installed base be at pretty well full capacity. So it does feel more real this year, and so I'm more optimistic, but we still have a pretty small number. Yes, a pretty small number. Actually, I think we might have just exceeded it. So that will -- that's probably going to -- Chris is looking at me like I'm sharing too much already. So that order we just got -- those orders we just got in, I think we exceed what we were already planning. So we'll see how this goes. There's just a lot of opportunity. But AI is going to be a big chunk of our business this year, both in dollars and percentage.

Fantastic. And then just on the memory, it sounds like you feel more confident in the development program. Last quarter, you did mention kind of roughly the same words that it could lead to orders in '27 and revenue in '28. But it sounded like you were more confident that you will get orders at some point in fiscal '27 for revenue in '28. Did I hear that right? Or did I...

More confident than last -- I'm not sure I'm more confident than last quarter. I mean I was moderately confident last quarter as well. We're -- we have more detail. We've actually started to spend money on it. So we've hired some people and redirected some people, and we're doing architectural schematics and assessment. There's some software that started, physical board layouts as part of the proposals to the customers. And -- but we really believe you need a committed customer to a project. There's sort of -- whether it be a PO or a sponsorship, but you need to make sure you're aligned with what they want and what they're going to buy at the price point you're willing to sell them at. And that's the piece that we still need to get ourselves resolved to. There's been some dynamics during the last year, if you look in the last 12 months, what's kind of changed. The introduction of high-bandwidth flash is a doozy, right? That has really put at least a couple of them, it's publicly known on their heels in terms of what they were going to do, how they could test it and it broke a lot of things. The other piece is the new HBM, which is a DRAM, right? High-bandwidth memory is DRAM, high-bandwidth flash is, of course, flash. But HBM, new standards that are coming out, and I don't want to get too carried away here, some of which is driven by specific end users have embedded BIST capabilities in it, which means that the testability changes dramatically and we think could be in our favor. So it's given me some additional optimism with respect to our ability to maybe do HBM sooner than we were thinking certainly 6 months ago. But I'm going to just keep an optimistic attitude that we're going after this business, but I would be hesitant for you to build models with a lot of revenue in that yet, certainly not next year.

Great. And then I'll just slip in one more, if I could. There was a lot of different discussions regarding capacity. And I guess I couldn't write all the answers down quick enough to kind of do the math. But as you sit here today, as far as top line revenue capacity, what do you believe it is?

Yes. So we've talked about some different pinch points, okay? So people that have visited us know that we have done the -- until recently, all of our systems and our consumable WaferPaks came out of our Fremont facility. But the supply chain of our chambers, our Blades and all the subsystems and printed circuit boards are, of course, built by contract manufacturers. For the 150 employees or thereabouts that Aehr has, we have probably another 250 people in direct contract manufacturers building stuff for us in low-cost regions around the world. We have increased our capability in our facility maybe tenfold with the remodel and the other things that we've done. But we still are only running one shift from an operational perspective. We don't have the people to ship tenfold, but the capacity is here to be able to do that. People go, well, that's crazy. Why would you do that? Well, as some of the deals we're talking about, if a customer comes to us and said, "I want 100 systems," you have to be able to say, "I can do that, and it won't take me 3 years to build it for you," okay? In parallel, we talked about this in more detail last quarter, we pulled the trigger last September with one of the contract manufacturers in Asia that does assemblies of one of our chamber suppliers. And they upgraded their facility to near clean room space in anticipation of some of the projects that we wanted to outsource to them. We then initiated and gave them orders and work with them to build our Sonoma systems, and then the last quarter, we shipped our first Sonoma systems directly to a customer out of that facility. Now our team was there working with them, bringing them up, qualifying everything, demonstrating, then observing, then qualifying the tools. But those systems are actually being installed, I think, last week or this week at our large hyperscaler customer. And their entire backlog is expected to ship directly out of there. We think the capacity out of that is probably upwards of 20 Sonoma systems a month. And that would basically not impact any of our capacity here. So our capacity is significant. I mean, measured in hundreds of millions of dollars for sure. And we're doing some things to even potentially increase that. Not that we would then ship $1 billion a year, but what happens if we have to ship a couple of hundred million in a quarter. Think of it that way. So one of the challenges in our business is that it's always going to be lumpy. And we do not want to put money in place in infrastructure that's permanent because the business is cyclical. And 5, 8 years from now, what does this thing look like? We don't want to have built up into an enormous business. And if there's a softer year that we start losing money or not making as much profit. So I know that's a negative tone on this thing, but the discipline is how do you build up massive amounts of capacity without building up massive amounts of just fixed infrastructure.

The next question is coming from Jed Dorsheimer from William Blair.

Big congratulations to you, Gayn and Chris. I know how long it's been coming in terms of this inflection. So a few questions for you. I guess, first one, maybe just piggyback off your last response, Gayn, to Christian there. Did you -- did I hear you correctly 20 Sonoma systems per month? And if that is the case, that's about $100 million of Sonoma. Is that the right way to think about that in terms of the $140 million midpoint of guide?

So let me make sure I understand. So at our $140 million midpoint, that's nowhere near 20 Sonoma systems a month. The production Sonoma systems that we have in backlog, we've shared this with different people, including the consumable elements are somewhere in the $600,000, $700,000 apiece. They're actually smaller configurations than times quantity. And I think that we've done a pretty good job of announcing orders along the way. So our package-level burn-in Sonoma revenues are -- make sure I do this. I have them in front of me right now, probably $50 million, something along that range. I think that's good. Sorry, guys, I should have it in front of me. So that's -- think of the math of that, whatever, 60, 70 systems or so. So -- but we're actually shipping -- those are -- the customers actually ask for those kind of in a small period of time, very much centered around our second quarter. And so that's going to be one of the challenges is we're actually building them right now. We're going to start shipping them here during this quarter and then the bulk of them actually get delivered in the second quarter.

That is helpful. And then on the wafer-level, if we took that midpoint, what are the -- are you mixing in? I'm trying to separate consumables from package and wafer-level. Can you give some framework in terms of that breakdown?

Well, let me answer that question, Jed. So if you heard me, I mentioned about we're roughly in the 30% kind of distribution or -- WaferPaks in...

Revenue.

Yes. In revenue.

That's WaferPaks and BIMs. Yes.

Yes. No, I think that's a good assumption. It's about 30%.

That sounds right to me as well.

Okay. That's super helpful. And then 2 more for me. Just along the lines -- or maybe 3 more, sorry. But your largest processor GPU, TPU, CPU customer -- your AI customer, I think, is how you describe it. Do you -- in addition to the benchmark testing, I'm just curious that they're going with package-level, but could you update on the activity or discussions around wafer-level? I'm assuming that they're also engaged in kind of that open the door, if you will. So just an update...

Yes. Let me be clear because it's a bit of a lookup table. So we -- I think what you're talking about is our kind of lead AI production package-level burn-in customer who we've identified as one of the big hyperscalers, okay? They are -- they use Sonoma for all their qualification. They had never done production burn-in before, and they moved to production burn-in as we acquired Intel. And that's been a great win for everybody because of our capabilities to support them and obviously to meet their capacity needs. That customer -- the first device that ever went to production was on Sonoma. The second device is also going to be on Sonoma. They already bought some of the systems for it. That particular device has been a little bit delayed in terms of its timing, but it is still expected to ramp or, at least start to ramp during our fiscal year at this point. That's the one I described that has twice the power, and they're expecting higher volumes off of it, right? And then that same customer talked to us, what, maybe 6 months ago, the first time, the third device, they really want to consider wafer-level burn-in. And one way you might want to think about it is if there's a progression of number of compute chips in a single package, as they get higher, you -- wafer-level burn-in has a huge advantage because the devices fail during burn-in. And if you fail one of the compute chips, you throw away the other compute chips and all of the memory. And so at that point, it gets extremely expensive from a yield loss to continue to do package-level burn-in. So that would be where you'd want to cut in at wafer-level burn-in. So they've actually recently, again, this quarter, again, they're just bringing up their second device, but the third one, they've been talking to us about, okay, what DFT do we need to do? What do we need to put in? How do we optimize it around the FOX system? So it's pretty encouraging.

Got it. That's helpful. And just shifting gears, silicon photonics and co-packaged optics. I know you mentioned activities -- the gallium nitride really had struggled with reliability in the auto. Auto requirements are far lower than in data center by about 5x in terms of mean time failure. So I think that would be a good thing for you guys, but I'm just curious how you're thinking about market adoption, timing and then role in GaN specifically. I know what you've got for silicon carbide. Just curious in terms of activity around GaN and the higher failure rates there.

Okay. You actually mentioned silicon photonics, you mentioned silicon carbide and GaN. Let me just do -- I think through that window. GaN has been interesting. If you remember 1.5 years ago or so when we were engaged with the first GaN customer, we didn't know if they were going to go to production burn-in or not. Since then, we've been able to verify they are, and they're going through a major qualification with a bunch of industrial automotive and infrastructure and data center applications. It's -- unlike silicon carbide, that's like 2 or 3 big applications, GaN, we've done like 12 different types of devices. So they're like different voltages and power requirements that they go through all from solar to data center to electric switches in infrastructure and homes to automotive. They're all over the place. So they all have different kind of requirements. But so far as we can tell, every one of them needs a production burn-in screening to meet the reliability requirements. And it's been a learning process for us. So GaN is extremely difficult to actually test and burn-in at wafer-level. We've learned, but it's now been debugged and fully working through and things are going really well for us right now. So we think that, that will grow. Now the GaN market by the market forecasters is just dollar-wise is measured in single to tens of billions of dollars over the -- in this decade, whereas AI or memory is 10x that. So they can just -- they simply could never spend as much money as some of the other markets. But from a reliability perspective, it's very clear the value of burn-in, and we've been proving and validating the value of wafer-level burn-in of GaN similar to silicon carbide. And then silicon photonics, similarly, that's been the big debate as the data centers really need to go to burn-in -- to silicon photonics, optical transceivers for fiber optic communication basically. The burn-in requirements are kind of very clear in front and center. So the hyperscalers -- the big data center guys are all talking about this, and it's sort of cool to be in burn-in, if you will, right now. That sounds kind of funny of play on words. I've actually -- Chris is laughing. I've never said that before. But it is. It's just -- right now, it's a lot of people are talking about burn-in as the kind of the place. I believe that burn-in is by far the fastest-growing segment in all of semiconductor test right now and wafer-level burn-in in particular.

Awesome. Last question for me, I promise. Chris, can you just help with cadence in terms as you look at the year, how are you thinking -- I mean, Gayn mentioned second quarter in terms of some concentration on the package-level burn-in systems. Is there some way to think about this is a pretty big shift year-over-year in terms of the uplift, how to think about that flow as we go through the year? Any thoughts there or not specific guidance, but just general seasonality, if you will?

Did you mean the revenue run rate kind of -- so if you know historically, we kind of said, hey, our first half is softer than the second half. But I would say this year, it's hard to say that because as Gayn mentioned, we're going to ship a lot of the package-level Sonoma systems in the second quarter. So second quarter is going to be a big quarter. So you could...

First quarter has been pretty good. Second quarter is going to be bigger.

Yes. Pretty good.

Maybe third quarter is flattish and fourth quarter is up from there.

So there's a high likelihood that the first half might be the same or even better than the second half, but second quarter is going to be a good -- very strong quarter for us.