AEHR Test Systems Inc. - AEHR
Preannounces Q3 miss
Last Monday I was setting myself up to put out a quick note on these folks, which in hindsight would have been a good idea.
AEHR is one of those companies with a weird fiscal year, and their quarter ended on February 29th, so we should have been expecting some results in the early March timeframe and I was noticing something sorta odd.
I was going to point out that what were the chances that AEHR was actually going to announce a good quarter when the stock had pretty much traded lower every single day since the end of the quarter? Yeah, there were a couple of up days in there, but pretty much every close for a solid 2 week period the stock closed lower.
I mean, there has to be some sort of a study somewhere that tracks the correlation between a company hitting and missing their numbers and how the stock trades between the end of the quarter and the time that the company releases their results. If not, an academic somewhere should invest some time.
Companies, regardless of how well run, tend to be rather leaky to certain constituents, as appears to be the case here. In this case, it was a huge sign, and one I should have paid attention to.
The market, however, decided it was going to go straight up last week, and who needs to try battling a Fed-induced rally if they don’t really have to? So out went that quick note idea.
This morning rolls around and the company naturally preannounces some rather horrible numbers, and lowers guidance for the rest of the year as well. Big sigh. Oh well.
Here are the highlights.
For the fiscal third quarter ended February 29, 2024, Aehr expects:
Revenue of approximately $7.6 million
GAAP net loss of approximately $1.5 million to $1.8 million, or $0.05 to $0.06 per diluted share
Non-GAAP net loss of approximately $0.9 million to $1.2 million, or $0.03 to $0.04 per diluted share, which excludes the impact of stock-based compensation
Bookings of $24.5 million
Backlog as of February 29, 2024, of $20 million
For the fiscal 2024 full year ending May 31, 2024, Aehr expects:
Total revenue of at least $65 million
GAAP net income of approximately $11 million or more, or $0.38 per diluted share
Non-GAAP net income of approximately $14 million or more, or $0.48 per diluted share, which excludes the impact of stock-based compensation
Revenues for the year were supposed to be in a $75M-$85M range, so that is down to $65M. Net income was supposed to be at least 20% of revenues or maybe 60 cents a share, and now that is down to 38 cents.
At the end of Q2 I pointed out the disastrous Bookings and Backlog numbers and the fact that they had not reported an “effective” backlog number, which meant they had not booked any orders between the end of the quarter and the day that they reported, or for a solid month and a half. Not a good sign.
Then a week before quarter end they put out a release saying they have received $23M worth of orders during the quarter, which is pretty unusual for them to do mid-quarter. In hindsight again, why do you think they were trying to goose their stock making this type of a release when they knew the quarter was shaping up to be a disaster? I mean, the release came only a week before quarter end.
Going back, the last time they chose to put out a mid-quarter release announcing orders was in May 2023, a couple months before the stock topped out and the long slow decline began.
Even though Q3 is going to be a disaster, and Q4 will be down 30% or so year over year, I will be removing AEHR from my interest list at the end of the week. Having first mentioned the name close to $50 a share, and having tracked it all the way down, with the stock now set to open somewhere in the $11-$12 range, I will move on to other names and ideas.