Aehr Test Systems (AEHR 5.49%) stock soared 23.9% on Friday, following the semiconductor test and reliability qualification equipment supplier's release on the prior afternoon of a strong report for its first-quarter of fiscal 2023, which ended Aug. 31, 2022.
The market's delight can be attributed to the quarter's revenue easily beating Wall Street's expectation and earnings crushing the analyst consensus estimate. Investors were also surely pleased that management reiterated its full-year guidance and had positive things to say about the company's long-term outlook.
Aehr's robust growth is primarily being driven by increased demand for silicon carbide semiconductors for electric vehicles (EVs), though the company is also seeing an increase in demand for its equipment from the data communications supply chain.
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Aehr Test Systems' key numbers
| Metric | Fiscal Q1 2023 | Fiscal Q1 2022 | Change |
|---|---|---|---|
| Revenue | $10.7 million | $5.6 million | 89% |
| GAAP net income | $589,000 | $696,000 | (15%) |
| Adjusted net income | $1.3 million | ($414,000) | Flipped to positive from negative |
| GAAP earnings per share (EPS) | $0.02 | $0.03 | (33%) |
| Adjusted EPS | $0.05 | ($0.02) | Flipped to positive from negative |
Data source: Aehr Test Systems. GAAP = generally accepted accounting principles. Fiscal Q1 2023 ended Aug. 31.
Investors should focus on the adjusted numbers, which exclude one-time items.
Wall Street was looking for adjusted EPS of $0.01 on revenue of $8.5 million. So Aehr sped by both expectations.
The company's billings were $19.1 million for the quarter. It ended the period with a backlog of $19.5 million.
Aehr ended the quarter with cash and cash equivalents of $36.1 million, up from $6.5 million at the end of the year-ago period. It has a relatively light debt load.
What the CEO had to say
CEO Gayn Erickson's statement in the earnings release was super-long. Following is a part of his statement that should give investors an idea as to how the company's products fit into the EV supply chain.
"We are currently engaged or in discussions with almost all the existing and future silicon carbide suppliers regarding our unique, low cost, multi-wafer level test and burn-in solution. ... [It] allows our customers to burn-in every device at a lower cost than they could in any other form. ... The major silicon carbide companies expect that most electric vehicle traction inverters will move to multi-chip modules, and they have told us that they must move to wafer-level stress and burn-in to remove the inherent failures before they put these devices into multi-die modules to meet their cost, yield, and reliability goals of these modules."
Full-year guidance reiterated
For fiscal year 2023 (ending May 31), management reiterated its previously provided guidance for total revenue to be $60 million to $70 million, which would represent annual growth of 18% to 38%. Management also said that it expects a strong profit margin similar to last fiscal year. Last fiscal year, the company's adjusted profit margin (adjusted net income divided by revenue) was 23%.
In addition, the company continues to expect bookings to grow faster than revenue in fiscal 2023 "as the ramp in demand for silicon carbide [semiconductors] in electric vehicles increases exponentially throughout the decade," according to the earnings release.
Worth at least watching
Aehr Test Systems stock is worth a spot on growth investors' watch lists. Unlike many companies involved in the EV supply chain, Aehr is profitable.
It's a small-cap stock ($471 million market cap) and still flies under the radar of many investors. But the company is increasingly being discovered, thanks to its recent strong business performance and its stock price performance since mid-2021.
