Aehr Test Systems — Form 10-Q Summary
Reporting period: Fiscal first quarter ended August 31, 2019; comparisons are with the three months ended August 31, 2018 unless noted. Financial statements are unaudited. Amounts below are in U.S. dollars.
Financial results and liquidity
| Metric | Q1 FY2020 | Q1 FY2019 |
|---|---|---|
| Revenue | $5.533 million | $4.740 million |
| Gross profit / margin | $2.271 million / 41.0% | $1.553 million / 32.8% |
| Operating loss | $0.429 million | $1.442 million |
| Net loss | $0.413 million; $0.02 per share | $1.515 million; $0.07 per share |
| Cash used in operating activities | $0.190 million | $0.971 million |
- Cash and cash equivalents were $5.266 million at August 31, 2019, down from $5.428 million at May 31, 2019. Cash, cash equivalents and restricted cash totaled $5.346 million at quarter-end.
- Working capital was $13.8 million, compared with $14.5 million at May 31, 2019. Current assets were $18.293 million and current liabilities $4.540 million.
- Total liabilities were $6.739 million, including $2.692 million of operating lease liabilities. The company repaid its 9.0% convertible notes at maturity in April 2019; the filing does not show an outstanding borrowing balance at quarter-end.
- Cash used in investing was $0.050 million, primarily for property and equipment; financing provided $0.062 million, primarily from employee stock-plan issuances.
Changes versus the prior period
- Revenue increased 16.7%, led by wafer-level product revenue, which rose to $4.826 million from $1.969 million. Test During Burn-In revenue declined to $0.707 million from $2.771 million.
- Systems revenue rose to $2.934 million from $1.806 million; contactor revenue increased to $1.650 million from $1.153 million, while services revenue declined to $0.949 million from $1.781 million.
- Gross margin improved to 41.0% from 32.8%, primarily because of lower inventory-scrap costs and tooling and layout charges.
- SG&A decreased 3.8% to $1.808 million, and research and development decreased 20.1% to $0.892 million, mainly due to lower employment-related expenses; R&D material costs also fell.
- Interest income was $0.012 million versus net interest expense of $0.078 million, primarily reflecting repayment of the convertible notes.
Outlook, risks and other notable items
- Management said existing cash, operating income, receivable collections, backlog revenue, inventory sales and customer deposits/down payments were expected to meet liquidity needs for the next 12 months. The filing provides no quantified revenue or earnings guidance.
- Customer concentration increased: the five largest customers generated approximately 93% of quarterly sales, and two customers accounted for approximately 54%. The comparable five-customer share was 78%.
- Customer deposits and deferred revenue declined, which management attributed primarily to a lower backlog of customer orders with down payments. Contract liabilities were $0.728 million at quarter-end, versus $1.734 million at May 31, 2019.
- Adopting lease accounting on June 1, 2019 added $2.7 million of right-of-use assets and $2.8 million of lease liabilities; management reported no material effect on operating results or cash flows. Operating leases had a 3.9-year weighted-average remaining term.
- Key exposures include customer concentration, foreign-exchange movements (primarily euro and yen), and estimation risks in inventory, warranties and receivables. The company did not hedge currency exposure and said a 10% decline in subsidiary local currencies was not expected to materially affect results.
- Management attributed lower accrued expenses in part to severance payments related to a fiscal 2019 restructuring. No legal proceedings, off-balance-sheet financing arrangements or material acquisitions were reported.
Important facts for investors to verify
- Whether the strong wafer-level sales mix is sustainable and whether the sharp decline in Test During Burn-In sales continues.
- How the 93% sales concentration among the five largest customers, including the two customers contributing 54%, affects future revenue and collections.
- Whether backlog, customer deposits and deferred revenue recover, and whether management’s stated 12-month liquidity expectations remain supported by cash generation.
- Inventory composition and valuation, given $9.217 million of inventory against $5.266 million of balance-sheet cash.
- The full impact of lease commitments and any changes in borrowing needs following repayment of the convertible notes.