Aehr Test Systems — Form 10-Q Summary
Reporting period: Fiscal third quarter and nine months ended February 28, 2022. Unaudited results are compared with the periods ended February 28, 2021. Dollar amounts below are in millions unless stated otherwise.
Financial performance
| Metric | Q3 FY2022 | Q3 FY2021 | Nine months FY2022 | Nine months FY2021 |
|---|---|---|---|---|
| Net sales | $15.28 | $5.27 | $30.54 | $8.96 |
| Gross profit / margin | $6.40 / 41.9% | $1.89 / 36.0% | $13.20 / 43.2% | $2.50 / 27.9% |
| Operating income (loss) | $2.26 | ($0.65) | $1.98 | ($4.78) |
| Net income (loss) | $2.24 | ($0.74) | $3.66 | ($2.59) |
| Diluted EPS | $0.08 | ($0.03) | $0.13 | ($0.11) |
- Quarterly sales grew 190% year over year; nine-month sales grew 241%. Management attributed the increase mainly to stronger demand for wafer-level products.
- Q3 wafer-level product revenue was $14.88 million; Test During Burn-In revenue was $0.40 million. Asia accounted for $14.21 million of quarterly sales.
- Q3 gross margin improved 5.9 percentage points year over year. Higher manufacturing efficiency from increased volume was partly offset by a $1.0 million write-down of legacy-product inventory.
- Q3 SG&A was $2.61 million and R&D was $1.53 million, up 59% and 69%, respectively, year over year. Management cited higher headcount, commissions, and employment-related R&D costs.
- Nine-month net income included a $1.70 million gain from forgiveness of the PPP loan. The prior-year nine-month comparison included a $2.19 million gain related to the Japan subsidiary dissolution; these items affect comparability.
Cash flow, balance sheet, and liquidity
- Cash and cash equivalents were $32.02 million at February 28, 2022, versus $4.58 million at May 31, 2021. Cash, cash equivalents, and restricted cash totaled $32.10 million.
- Working capital was $42.5 million, compared with $10.1 million at May 31, 2021. Current assets were $55.27 million and current liabilities were $12.82 million.
- Nine-month operating cash flow was positive $2.28 million, versus negative $2.51 million a year earlier. Customer deposits and deferred revenue increased $6.0 million, while inventory and receivables rose $5.4 million and $3.5 million, respectively.
- Financing provided $25.40 million in the nine-month period, including $24.03 million net proceeds from the October 2021 at-the-market stock offering. The offering sold approximately 1.70 million shares; dilution is a relevant consideration.
- No borrowings were outstanding at quarter-end. The amended revolving facility has a stated limit of up to $10 million, subject to the borrowing base; reported availability was $2.52 million and maturity was January 13, 2023. The PPP loan was forgiven in full.
- Inventory was $14.15 million, up from $8.85 million at May 31, 2021. Customer deposits and short-term deferred revenue rose to $6.20 million from $0.19 million.
Outlook, risks, and notable items
- Management said existing cash, expected operating income, receivable collections, backlog, inventory sales, and customer deposits should meet working-capital and capital-equipment needs for the next 12 months. The filing provides no numerical revenue or earnings guidance.
- Management noted continued uncertainty about COVID-19’s potential effects and said it would continue investing in priority areas to pursue long-term profitable growth.
- Customer concentration is substantial: one customer represented approximately 90% of Q3 sales, and the five largest customers represented 99%. For the nine months, one customer represented approximately 84% and the top five 97%.
- The filing identifies potential financing constraints and dilution if additional capital is needed. It also reports foreign-currency exposure, but management did not expect a 10% decline in subsidiaries’ local currencies versus the U.S. dollar to significantly affect net income or loss.
- Management reported effective disclosure controls and no material change in internal control over financial reporting. The filing reports no legal proceedings and no off-balance-sheet financing arrangements.
Important facts for investors to verify
- Whether revenue growth and customer demand are sustained, particularly given the high concentration in one customer and in wafer-level products.
- Whether gross margins hold up after the $1.0 million legacy-inventory write-down and as production scales.
- Whether inventory growth converts into shipments and cash, and whether receivables are collected on schedule.
- The basis and timing for management’s expectation that current liquidity will cover the next 12 months, including actual borrowing-base availability.
- The effects of equity issuance, employee equity plans, and performance-based awards on share dilution; the filing says management expects all FY2022 revenue thresholds for certain performance RSUs to be achieved.