Aehr Test Systems — FY2019 Form 10-K
Reporting period: Fiscal year ended May 31, 2019. This is an annual report, not a standalone fourth-quarter filing. Financial amounts below are in U.S. dollars.
Business context
Aehr develops and sells semiconductor test and burn-in systems, wafer contactors, carriers, and related services. Its FOX product family supports wafer-level and singulated-die testing; ABTS systems test packaged devices. The company operates in one reportable segment.
Financial results and liquidity
| Metric | FY2019 | FY2018 |
|---|---|---|
| Revenue | $21.1 million | $29.6 million |
| Gross profit / margin | $7.6 million / 36.1% | $12.4 million / 41.9% |
| Operating income (loss) | ($5.0 million) | $0.9 million |
| Net income (loss) | ($5.2 million) | $0.5 million |
| Net income (loss) per share, diluted | ($0.23) | $0.02 |
| Cash used in operating activities | $5.6 million | $1.4 million |
| Cash and cash equivalents at year-end | $5.4 million | $16.8 million |
| Working capital at year-end | $14.5 million | $18.3 million |
FY2019 gross margin declined amid lower sales, manufacturing inefficiencies, product mix, and reserves for excess and obsolete inventory. Cash fell by $11.4 million during the year, including operating cash use and repayment of debt. The company reported no material off-balance-sheet financing arrangements.
At May 31, 2019, total liabilities were $5.9 million and shareholders’ equity was $15.5 million. The $6.1 million of 9% convertible notes was repaid at maturity on April 10, 2019; no debt remained on the balance sheet at year-end. Contractual obligations included $3.2 million of operating lease payments and $2.5 million of supplier purchase obligations.
Changes versus prior year
- Revenue fell 28.8%. Test-during-burn-in sales dropped about $10.0 million to $6.4 million, as customers used capacity acquired in the prior year and OEM sales declined.
- Wafer-level sales increased about $1.5 million to $14.6 million. They represented approximately 69% of FY2019 revenue, versus 44% in FY2018; packaged-part systems represented 31%, versus 56%.
- SG&A rose 6.0% to $7.7 million, primarily due to employment-related costs; R&D was broadly unchanged at $4.2 million.
- The company recorded $725,000 of restructuring expense for a February 2019 plan, including $408,000 accrued at year-end and expected to be paid in FY2020. It said no further costs were expected under that plan.
- Backlog declined to $7.5 million from $8.4 million. Management cautioned that cancellations, rescheduling, and shipment delays limit backlog’s usefulness as a predictor of sales.
Quarterly and other notable information
For the three months ended May 31, 2019, revenue was $7.2 million, gross profit was $3.4 million, and net income was $110,000 (reported EPS rounded to $0.00). The prior-year quarter recorded revenue of $7.3 million and net income of $191,000.
Sales were highly concentrated: four customers accounted for 72% of FY2019 revenue, led by Intel at 36%, Texas Instruments at 14%, Cypress Semiconductor at 12%, and STMicroelectronics at 10%. The five largest customers represented approximately 80% of sales. About 36% of revenue was attributable to shipments outside the United States.
Management stated that cash and expected operating inflows, receivable collections, backlog shipments, inventory sales, and customer deposits should meet liquidity needs for the next 12 months. It also cautioned that financing might be needed depending on growth and profitability, and that additional financing may not be available on acceptable terms. No numerical revenue or earnings guidance was provided.
Key risks include dependence on a small number of customers and large system orders, the early-stage market acceptance and qualification cycle for FOX products, intense competition and price pressure, supplier concentration, semiconductor cyclicality, international trade and currency exposure, and execution of new-product development. The company reported a full valuation allowance against deferred tax assets. The auditor gave an unqualified opinion on the financial statements; management reported effective disclosure controls and internal control over financial reporting, with no auditor attestation of internal controls.
Important facts for investors to verify
- Whether wafer-level sales and FOX adoption can offset continued weakness in packaged-part/ABTS demand, and whether reported backlog converts to shipments.
- Cash burn, receivable collections, customer deposits, and liquidity after the $6.1 million note repayment; assess whether further financing could be required.
- Customer concentration and large-quarter-end shipments: three customers represented 90% of gross receivables at May 31, 2019.
- Gross-margin recovery, inventory reserve adequacy, and any actual payments or additional charges related to restructuring.
- Supplier availability, customer qualification timelines, and any changes in competitive, trade, currency, or listing-compliance risks.