AEHR Update Post Q1 Report

Posted on December 3, 2020 by Brad Steveson

Aehr Test Systems Fiscal Q1 ending Aug 2020 was indeed an abysmal quarter with barely 2m in total revenue.  This is the lowest revenue number I have seen by far since I began following this stock in 2017.  The 2nd lowest quarter was 3.1m in fiscal Q3 ending Feb 2019 followed by 3.7m in fiscal Q4 ending May 2020.  AEHR offered an explanation and cost reduction strategy in the Q1 release with these points: 

The forecast looks weak to possibly abysmal for fiscal Q2 ending Nov 2020.  I expect no more than 3m in total revenue for this quarter and it could be lower with only 1.2m in backlog reported at the end of Q1.  Consumables will make up the rest of Q2 revenue and it is anybody’s guess as to what that number will be, but 2m or less is a reasonable guess. 

So, what is the good news?  I think the funnel is full and the opportunities are significant.  There seems to be several ways for AEHR to win going into 2021. 

  1.  The sales funnel looks the same as it did 6 months ago.  Customers were holding off during the summer, but they are beginning to get back to business with AEHR. 
  2. A large silicon carbide customer has contacted AEHR.  It is a large company with great visibility into the future business AEHR expects to have with them.
  3. Revenue Guidance of 25m to 28m means that AEHR will have to do 20m+ in the last 2 fiscal quarters to achieve this.  That’s big compared to the 5m they will likely do in the first 2 fiscal quarters.  Most revenue will have to be booked by March or early April to meet the guidance, so we will see it in order announcements ahead of time if it is going to happen.  We got one today for 4.5m that will ship during fiscal Q3.  Aehr Receives $4.3 Million Order for Initial FOX-XP™ Test Cell for Production Test of Mobile Sensor Devices | Seeking Alpha
  4. The company is getting inquiries for mobile applications with potential for more.  They have applications that can be 100% burn in and AEHR currently has none of these customers.  They are just scraping the tip of the iceberg with them.  Think Apple glasses 3d sensors and health-based sensors for Apple watch as examples. 
  5. Intel data center ramp was supposed to happen during 2020.  Covid delayed this and it looks like that will happen during 2021.  I am told that the units being built are very large.

So, while I do not expect a good report on fiscal Q2 ending Nov 2020, which is likely to be released in early January, I am cautiously optimistic for a significant increase in order announcements over the next 3 months and a strong 2nd half of the current fiscal year ending May 2021 with momentum going into fiscal 2022.

My 2021 forecast could see as much as 16c EPS for the last 2 quarters and a run rate going into fiscal 2022 of 50c+. I will be watching new order announcements carefully for signs of a ramp up with mobile and data center orders.

AEHR Income Stmt (In thousands)Aug 20QNov 20QFeb 21QMay 21Q2021 FY
Quarter #12344
Net Sales2,0123,0007,00013,00025,012
Cost of Sales1,7852,0003,8507,15014,785
Gross Profit2271,0003,1505,85010,227
GM%11.28%33.33%45.00%45.00%40.89%
Selling, G&A1,5141,4001,7002,0006,614
R&D9008009001,0003,600
Restructuring00000
Total Operating Expense2,4142,2002,6003,00010,214
Income/Loss from Operations-2,187-1,2005502,85013
Gain from dissolution AEHR Japan2,1862,186
Interest Expense-13-13-13-13-52
Other Income/Expense Net-94-94-94-94-376
Income/Loss before Tax-108-1,3074432,7431,771
Income Tax Exp/Ben215-10-10-10185
Net Income/Loss107-1,3174332,7331,956
GAAP Gain/Loss per share0.00-0.060.020.120.08
Diluted23,45523,45523,45523,45523,139
Stock based Comp2702702702701,080
Restructuring00000
E&O Provision-2,401000-2,401
Non GAAP Gain/Loss-2,024-1,0477033,003635
Non GAAP Gain/Loss per share-0.09-0.040.030.130.03
Q1 actual. Q2, Q3, Q4 and FY 2021 are my estimates based on guidance and a discussion with management

Disclosure: I am long and I may buy or sell shares within the next 72 hours.

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