Aehr Test Systems — Form 10-Q Summary
Reporting period: First quarter of fiscal 2022, the three months ended August 31, 2021; filed October 14, 2021. Unaudited results are compared with the three months ended August 31, 2020. Amounts below are in U.S. dollars.
Financial results
| Metric | Q1 FY22 | Q1 FY21 |
|---|---|---|
| Net sales | $5.646 million | $2.012 million |
| Gross profit / gross margin | $2.281 million / 40.4% | $227,000 / 11.3% |
| Operating expenses | $3.274 million | $2.414 million |
| Operating loss | $993,000 | $2.187 million |
| Net income | $696,000 | $107,000 |
| Diluted EPS | $0.03 | $0.00 |
| Cash provided by operating activities | $1.874 million | $643,000 |
Sales rose 180.6%, chiefly from wafer-level products, whose sales increased to $5.143 million from $1.559 million. Test During Burn-In sales were $503,000, versus $453,000. Asia accounted for $5.137 million of quarterly sales, compared with $969,000 a year earlier. Management attributed the gross-margin improvement primarily to manufacturing efficiencies from higher sales. SG&A rose 29.0% to $1.953 million, and R&D rose 46.8% to $1.321 million.
Balance sheet, liquidity and capital
- At August 31, cash and cash equivalents were $6.530 million; current assets were $21.699 million and current liabilities were $8.760 million. Working capital was $12.9 million, up from $10.1 million at May 31, 2021.
- Inventory was $10.146 million, up from $8.849 million at May 31. Operating cash flow included a $3.141 million increase in customer deposits and deferred revenue, partly offset by a $1.324 million inventory increase.
- The company had no outstanding balance on its revolving credit facility and reported $1.707 million available to borrow. The facility maturity had been extended to January 13, 2022. The PPP loan was forgiven in full; no long-term debt remained on the August 31 balance sheet.
- Cash increased by $1.948 million during the quarter. Investing activities used $59,000; financing activities provided $135,000, including $1.535 million from employee stock issuance, offset partly by a $1.4 million line-of-credit repayment.
- After quarter-end, the company completed a $25 million at-the-market stock offering, selling 1,696,729 shares at an average $14.73 per share. Estimated net proceeds were $24.0 million. This was subsequent to the August 31 balance-sheet date.
Outlook, commentary and risks
Management said cash, expected operating income, collections, existing backlog, inventory sales, and customer deposits were expected to cover working-capital and capital-equipment needs for the next 12 months. No specific revenue or earnings guidance was provided. Management continued to describe COVID-19 effects and the broader operating environment as uncertain, while stating it was investing in priority areas to pursue long-term profitable growth.
- Customer concentration increased: the five largest customers represented approximately 95% of quarterly sales, and two customers represented approximately 69% and 16%, respectively.
- The $1.698 million PPP forgiveness gain supported reported net income; operating loss remained $993,000. The prior-year comparison included a $2.186 million gain from the Japan subsidiary dissolution and a $215,000 related tax benefit.
- Management cited risks to future funding, including the possibility that financing may not be available on acceptable terms; additional equity financing could dilute existing shareholders. The ATM offering raised capital but increased shares outstanding.
- COVID-19, customer demand, supply and manufacturing execution, and reliance on a concentrated customer base may affect results. The filing reported no legal proceedings and no material changes to previously disclosed risk factors.
Investor verification priorities
- Track whether the sales increase and 40.4% gross margin are sustained, particularly given the concentration of sales in two customers and Asia.
- Assess order conversion, customer deposits, backlog and inventory levels; deposits rose materially, while management’s 12-month liquidity assessment relies partly on future shipments and collections.
- Separate recurring operating performance from the one-time PPP forgiveness gain and compare operating cash flow with net income.
- Confirm the net proceeds and share-count impact of the post-quarter ATM offering, and review subsequent filings for use of proceeds.
- Monitor liquidity and financing availability, including the revolving facility’s January 2022 maturity and the company’s ability to meet its stated operating needs.