Aehr Test Systems — FY2021 Form 10-K
Reporting period: Fiscal year ended May 31, 2021. The filing also reports fourth-quarter results for the three months ended May 31, 2021. Aehr designs and sells semiconductor test and burn-in equipment, including wafer-level FOX systems and packaged-device ABTS systems.
Financial results and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Net sales | $16.6 million | $22.3 million |
| Gross profit / margin | $6.0 million / 36.3% | $8.4 million / 37.6% |
| Operating loss | $4.2 million | $2.8 million |
| Net loss | $2.0 million | $2.8 million |
| Net loss per share, basic and diluted | $0.09 | $0.12 |
| Cash used in operating activities | $2.7 million | $2.0 million |
| Cash and cash equivalents at year-end | $4.6 million | $5.4 million |
| Working capital at year-end | $10.1 million | $13.8 million |
- Fourth-quarter FY2021 revenue was $7.638 million, gross profit $3.534 million and net income $567,000. In fourth-quarter FY2020, revenue was $3.773 million, gross loss $93,000 and net loss $2.885 million.
- At May 31, 2021, the company had $1.4 million drawn on its revolving credit line, with $308,000 available to borrow. The balance sheet also showed $1.679 million of current long-term debt for the PPP loan; the full loan and interest were subsequently forgiven on June 4, 2021. SVB later confirmed the credit-line maturity extension to January 13, 2022.
- Net cash used in investing was $227,000; financing provided $2.0 million, primarily from the credit-line borrowing and employee-plan share issuance.
Material changes and unusual items
- Annual sales fell 25.5%, primarily due to COVID-19-related reductions in orders and revenue. Wafer-level sales decreased to $15.0 million from $19.8 million; packaged-part test-during-burn-in sales fell to $1.6 million from $2.5 million.
- Gross margin declined 1.3 percentage points, reflecting lower-volume manufacturing inefficiencies and increased warranty provision, partly offset by lower inventory reserves. Inventory write-downs were $176,000, down from $1.669 million in FY2020.
- Operating expenses decreased to $10.2 million from $11.1 million, as lower SG&A was partly offset by higher R&D. FY2021 included a $2.186 million gain from liquidation of the Japan subsidiary, which reduced the reported net loss; the gain was mainly a released cumulative currency translation adjustment.
- Revenue mix shifted geographically: sales by ship-to location were $11.1 million in Asia, $5.4 million in the U.S., and $140,000 in Europe, versus $7.6 million, $13.5 million, and $1.2 million, respectively, in FY2020.
- Backlog was $1.6 million at year-end, compared with $2.5 million a year earlier. Management cautions that orders can be rescheduled or canceled and backlog may not predict future sales.
Outlook, risks and contingencies
- No specific revenue or earnings guidance is provided. Management expects available cash, operating receipts, collections, backlog-related revenue, inventory sales and customer deposits to cover working-capital and capital-equipment needs for the next 12 months, while continuing investment in priority areas for long-term profitable growth. Additional financing may be needed depending on growth and profitability; availability and terms are uncertain.
- Key risks include ongoing pandemic effects, semiconductor-component shortages and supplier concentration, customer and revenue concentration, order volatility, intense competition and pricing pressure, and the need for FOX product qualification and broader market acceptance. Four customers represented 77% of FY2021 sales; the five largest represented approximately 84%.
- Inventory valuation was identified by the auditor as a critical audit matter because of management judgment in forecasting demand. Inventory was $8.849 million at year-end.
- Purchase obligations totaled $3.377 million, generally due within 12 months; total contractual obligations were $8.333 million, including leases and debt. The company reported no pending litigation expected to have a material effect and no off-balance-sheet financing arrangements.
- The independent auditor gave an unqualified opinion on the financial statements. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor did not attest to internal controls.
Investor facts to verify
- Whether the post-year-end PPP forgiveness and credit-line maturity extension were completed as disclosed, and the company’s current borrowing availability and liquidity.
- Recent order, backlog and shipment trends, including whether demand recovery is broad-based or concentrated among a few customers and in Asia.
- Inventory demand assumptions, component availability, and the trajectory of warranty costs following the voluntary component replacement.
- Whether operating cash use, gross margins and profitability improve without reliance on the nonrecurring Japan liquidation gain.
- Potential dilution from outstanding options and equity plans; 24,168,522 shares were outstanding at July 31, 2021.