Aehr Test Systems — Q3 FY2021 Form 10-Q
Reporting period: Fiscal third quarter and nine months ended February 28, 2021. Unaudited results; dollar amounts below are in millions unless stated otherwise.
Business context and results
Aehr develops and manufactures semiconductor burn-in and test equipment, including wafer-level systems and contactors. Management attributed weaker orders and revenue to COVID-19 impacts on customers and their customers.
| Metric | Q3 FY2021 | Q3 FY2020 | Nine months FY2021 | Nine months FY2020 |
|---|---|---|---|---|
| Net sales | $5.267 | $6.111 | $8.962 | $18.518 |
| Gross profit | $1.894 | $2.991 | $2.498 | $8.464 |
| Gross margin | 36.0% | 48.9% | 27.9% | 45.7% |
| Operating income (loss) | ($0.652) | $0.255 | ($4.783) | $0.076 |
| Net income (loss) | ($0.735) | $0.245 | ($2.594) | $0.083 |
| Diluted EPS | ($0.03) | $0.01 | ($0.11) | $0.00 |
- Q3 revenue fell 13.8% year over year; nine-month revenue fell 51.6%. Nine-month wafer-level product revenue was $7.804 million, down from $16.570 million; Test During Burn-in revenue was $1.158 million, down from $1.948 million.
- Q3 SG&A declined 13.1% to $1.643 million, while R&D rose 6.9% to $0.903 million. For the nine months, SG&A declined 20.5% to $4.658 million and R&D increased 3.6% to $2.623 million.
- Nine-month net loss includes a $2.186 million gain from the Japan subsidiary dissolution. The filing does not provide a directly stated adjusted net loss excluding this item.
Cash flow, liquidity and debt
- Nine-month operating cash use was $2.511 million, investing cash use was $0.205 million, and financing provided $1.883 million. Cash, cash equivalents and restricted cash decreased $0.695 million to $4.818 million, including $0.080 million of restricted cash.
- At February 28, 2021, cash and cash equivalents were $4.738 million, working capital was $9.5 million (versus $13.8 million at May 31, 2020), and current assets were $16.369 million against current liabilities of $6.911 million.
- The company had drawn $1.4 million on its SVB revolving line, with $0.349 million available to borrow. The maturity was extended to July 14, 2021, with a possible extension to January 13, 2022 if specified operating metrics are achieved by May 31, 2021.
- The $1.679 million PPP loan remained outstanding, bearing 1% interest. The company applied for full forgiveness; SBA approval was still pending, and forgiveness was not assured. Balance-sheet debt included $1.492 million current and $0.187 million long-term.
- Management stated that cash, collections, inventory sales, backlog revenue, and customer deposits were expected to meet working-capital and capital-equipment needs for the next 12 months. Backlog was $4.6 million as of the filing date. Management cautioned that additional financing, if needed, might not be available on acceptable terms.
Material changes, risks and unusual items
- Management cited COVID-related order and revenue declines and introduced mandatory vacation and shutdown days and executive pay reductions. It continued investing in priority areas but said pandemic effects remained uncertain.
- Q3 gross margin was pressured by warranty provisions, lower-volume manufacturing inefficiencies, and inventory reserves. The company recorded a $299,000 charge associated with voluntary component replacement to improve long-term system reliability; warranty liability reached $0.500 million at quarter-end.
- Five largest customers represented approximately 95% of Q3 sales and 82% of nine-month sales. Q3 sales were concentrated in Asia ($4.122 million), compared with $1.113 million in the United States.
- ATS-Japan liquidation was completed July 31, 2020. The related $2.186 million gain and $0.215 million income-tax benefit are unusual, non-operating items.
- The filing reports no legal proceedings, no off-balance-sheet financing arrangements, and no material change in internal control over financial reporting. Management assessed disclosure controls as effective.
Key investor verification points
- Whether the $4.6 million backlog converts to recognized revenue and cash, and whether customer orders recover.
- Customer concentration, particularly the exposure represented by the five largest customers.
- Further warranty costs or customer impacts related to the component replacement and reserve adjustments.
- PPP loan forgiveness status and whether the company meets the operating metrics required to extend the SVB line beyond July 2021.
- Cash burn, working-capital needs, and the reliability of management’s stated 12-month liquidity outlook.