AEHR TEST SYSTEMS
For the period ended Aug 30, 2024. Filed Oct 11, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Aug 30, 2024 · Filed Oct 11, 2024
AEHR$53.57+9.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-02-29; filed 2024-04-10.
0001654954-24-004455
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-08-30; filed 2024-10-11.
0001654954-24-012913
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 39 previous paragraphs and 42 current paragraphs.
17 unchanged; 15 reworded; 10 added; 7 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 8 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (10)
Current report
Business CombinationsAccounting for business combinations requires management to make significant estimates and assumptions to determine the fair values of assets acquired and liabilities assumed at the acquisition date. The assumptions and estimates are based, in part, on historical experience and information obtained from management of the acquired company and are inherently uncertain. Critical estimates in valuing certain acquired intangible assets include, but are not limited to, future expected cash flows including revenue growth rate assumptions from product sales, customer orders and acquired technologies, estimated royalty rates used in valuing technology-related intangible assets, and discount rates. The discount rates used to discount expected future cash flows to present value are typically derived from a weighted-average cost of capital analysis and adjusted to reflect inherent risks. Unanticipated events and circumstances may occur that could affect either the accuracy or validity of such assumptions, estimates or actual results.
Current report
Impairment of Goodwill We assess goodwill for impairment annually during our fourth fiscal quarter or whenever events or changes in circumstances indicate the carrying value may not be fully recoverable. The process of evaluating the potential impairment of goodwill requires significant judgment. We may first evaluate qualitative factors to assess if it is more likely than not that the fair value of a reporting unit is less than its carrying amount and to determine if an impairment test is necessary. We may choose to proceed directly to the quantitative impairment test, bypassing the initial qualitative assessment. The quantitative test compares the fair value of the reporting unit to its carrying value, including goodwill allocated to that reporting unit. A goodwill impairment loss would be the amount by which a reporting unit’s carrying value exceeds its fair value, however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.
Current report
Impairments of Long-Lived AssetsWe monitor the carrying value of long-lived assets for potential impairment each quarter based on whether certain triggering events have occurred. These events include current period losses combined with a history of losses, or a projection of continuing losses, or a significant decrease in the market value of an asset. When a triggering event occurs, we perform an impairment calculation, comparing projected undiscounted cash flows, utilizing current cash flow information and expected growth rates, to the carrying value of the assets. If we identify impairment for long-lived assets to be held and used, we compare the assets’ current carrying value to the assets’ fair value. Fair value is determined based on market values or discounted future cash flows. We record impairment when the carrying value exceeds fair market value.
Current report
We have not recorded any impairment charges during the three months ended August 30, 2024 and August 31, 2023.
Current report
Fiscal Year
Current report
Beginning on June 1, 2024, we have changed our fiscal year to the 52- or 53-week period ending on the Friday nearest May 31. Our first fiscal quarter in fiscal 2025 ended on August 30, 2024, and our fiscal year 2025 will end on May 30, 2025.
Current report
Impact of Acquisition
Current report
We completed the acquisition of Incal Technology, Inc. (“Incal”) on July 31, 2024. Revenue from the acquired products and services subsequent to the acquisition date was not material to our results of operations for the three months ended August 30, 2024. However, we may quantitatively disclose the impact of the expense contributions from the acquisition where such discussions are significant to understanding our financial results.
Current report
Income tax expense increased due to the release of valuation allowance in the fourth quarter of fiscal 2024. Starting in fiscal 2025, the Company recognized U.S. federal and state income tax expense from the current period taxable income.
Current report
Net cash used in financing activities decreased by $0.6 million for the three months ended August 30, 2024, compared to the three months ended August 31, 2023. The decrease was primarily due to a reduction in shares repurchased for tax withholdings on vesting of restricted stock units.
Removed paragraphs (7)
Previous report
Revenue increased to $49.6 million for the nine months ended February 29, 2024 from $42.7 million for the nine months ended February 28, 2023, primarily driven by strong sales in contactors. Our contactors revenue increased by $11.8 million, and our services revenue increased by $0.7 million. The increase was partially offset by a decrease in systems revenue of $5.6 million.
Previous report
N.M.-Not meaningful
Previous report
Gross profit increased to $24.1 million for the nine months ended February 29, 2024 from $21.3 million for the nine months ended February 28, 2023. Gross margin decreased to 48.6% for the nine months ended February 29, 2024 from 49.8% for the nine months ended February 28, 2023. The decrease in gross margin of 1.2 percentage points was primarily driven by a slight decrease in products gross margin due to higher costs from design changes and logistics, partially offset by improved services gross margin.
Previous report
Research and development expenses increased to $6.6 million for the nine months ended February 29, 2024, compared to $4.9 million for the nine months ended February 28, 2023. The increase of $1.7 million was primarily due to higher non-recurring engineering services charges of $0.7 million, higher employment-related costs of $0.6 million and an increase in allocated facility cost of $0.2 million.
Previous report
Selling, general and administrative expenses increased to $10.0 million for the nine months ended February 29, 2024, compared to $8.7 million for the nine months ended February 28, 2023. The increase of $1.3 million was primarily due to an increase in employment-related cost of $1.1 million and an increase in audit and legal service fees of $0.3 million.
Previous report
Income tax expense was not significant due to the available net operating losses and research and development credits carryforwards.
Previous report
Net cash provided by financing activities decreased by $7.4 million for the nine months ended February 29, 2024, compared to the nine months ended February 28, 2023. During the nine months ended February 28, 2023, net proceeds from the sale of our common stock under our “At the market” offering program were $6.9 million compared to no such sales during the same period in the current year.
Reworded paragraphs (15)
Previous wording
We are a leading provider of test solutions for testing, burning-in, and stabilizing semiconductor devices in wafer level, singulated die, and package part form, and have installed thousands of systems worldwide. Increasing quality, reliability, safety, and security needs of semiconductors used across multiple applications, including electric vehicles, electric vehicle charging infrastructure, solar and wind power, computing, data and telecommunications infrastructure, and solid-state memory and storage, are driving additional test requirements, incremental capacity needs, and new opportunities for our test products and solutions.
Current wording
We are a leading provider of test solutions for testing, burning-in, and stabilizing semiconductor devices in wafer level, singulated die, and package part form, and have installed thousands of systems worldwide. Decarbonization and digitalization is driving increased quality, reliability, safety, and security needs of semiconductors used across multiple applications, including electric vehicles, electric vehicle charging infrastructure, solar and wind power, computing, data and telecommunications infrastructure, and solid-state memory and storage. The trend is driving additional test requirements, incremental capacity needs, and new opportunities for our test products and solutions.
Previous wording
We have developed and introduced several innovative products including the FOX-P family of test and burn-in systems and FOX WaferPak Aligner, FOX WaferPak Contactor, FOX DiePak Carrier and FOX DiePak Loader. The FOX-XP and FOX-NP systems are full wafer contact and singulated die/module test and burn-in systems that can test, burn-in, and stabilize a wide range of devices such as leading-edge silicon carbide-based and other power semiconductors, 2D and 3D sensors used in mobile phones, tablets, and other computing devices, memory semiconductors, processors, microcontrollers, systems-on-a-chip, and photonics and integrated optical devices. The FOX-CP system is a low-cost single-wafer compact test solution for logic, memory and photonic devices and the newest addition to the FOX-P product family. The FOX WaferPak Contactor contains a unique full wafer contactor capable of testing wafers up to 300mm that enables Integrated Circuit manufacturers to perform test, burn-in, and stabilization of full wafers on the FOX-P systems. The FOX DiePak Carrier allows testing, burning in, and stabilization of singulated bare die and modules up to 1,024 devices in parallel per DiePak on the FOX-NP and FOX-XP systems up to nine DiePaks at a time.
Current wording
We have developed and introduced several innovative products including the FOX-P family of test and burn-in systems and FOX WaferPak Aligner, FOX WaferPak Contactor, FOX DiePak Carrier and FOX DiePak Loader. The FOX-XP and FOX-NP systems are full wafer contact and singulated die/module test and burn-in systems that can test, burn-in, and stabilize a wide range of devices such as leading-edge silicon carbide-based and other power semiconductors, 2D and 3D sensors used in mobile phones, tablets, and other computing devices, memory semiconductors, processors, microcontrollers, systems-on-a-chip, and photonics and integrated optical devices used in artificial intelligence. The FOX-CP system is a low-cost single-wafer compact test solution for logic, memory and photonic devices and the newest addition to the FOX-P product family. The FOX WaferPak Contactor contains a unique full wafer contactor capable of testing wafers up to 300mm that enables Integrated Circuit manufacturers to perform test, burn-in, and stabilization of full wafers on the FOX-P systems. The FOX DiePak Carrier allows testing, burning in, and stabilization of singulated bare die and modules up to 1,024 devices in parallel per DiePak on the FOX-NP and FOX-XP systems up to nine DiePaks at a time.
Previous wording
Our discussion and analysis of our financial condition and results of operations are based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these Condensed Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, assumptions and judgments, including those related to customer programs and incentives, product returns, credit losses, inventories, income taxes, warranty obligations, and long-term service contracts. Our estimates are derived from historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Those results form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. For a discussion of the critical accounting policies, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended May 31, 2023.
Current wording
Our discussion and analysis of our financial condition and results of operations are based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these Condensed Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, assumptions and judgments, including those related to customer programs and incentives, inventories, and income taxes. Our estimates are derived from historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Those results form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. For a discussion of the critical accounting policies, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024.
Previous wording
There have been no material changes to our critical accounting policies and estimates during the three and nine months ended February 29, 2024 compared to those discussed in our Annual Report on Form 10-K for the fiscal year ended May 31, 2023.
Current wording
Except for the critical accounting estimates related to Business Combination and Impairment of Goodwill and Long-lived Assets newly discussed below, there have been no material changes to our critical accounting policies and estimates during the three months ended August 30, 2024 compared to those discussed in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024.
Previous wording
Discussion of Results of Operations for the Three and Nine Months Ended February 29, 2024 compared to the Three and Nine Months Ended February 28, 2023
Current wording
Discussion of Results of Operations for the Three Months Ended August 30, 2024 compared to the Three Months Ended August 31, 2023
Previous wording
Revenue decreased to $7.6 million for the three months ended February 29, 2024 from $17.2 million for the three months ended February 28, 2023, driven by a decrease in shipments for our products and services due to the recent overall softness in the demand for electric vehicles. Our systems revenue decreased by $7.8 million, our contactors revenue decreased by $1.5 million, and our services revenue decreased by $0.3 million.
Current wording
Revenue decreased to $13.1 million for the three months ended August 30, 2024 from $20.6 million for the three months ended August 31, 2023, driven by a decrease in shipments of our systems and services due to the recent overall softness in the demand for electric vehicles. Our systems revenue decreased by $8.0 million and our services revenue decreased by $0.3 million, partially offset by an increase in our contactors revenue of $0.8 million.
Previous wording
On a geographic basis, revenues represent products that were shipped to or services that were performed at our customer locations. For the three months ended February 29, 2024 compared to the three months ended February 28, 2023, revenue in Asia and United States decreased, driven by fewer shipments to our customers in Asia and United States due to the recent overall softness in the demand for electric vehicles, partially offset by the increase in revenue from customers in Europe. For the nine months ended February 29, 2024, international revenues increased, compared to the same period in the prior year, primarily as a result of the more shipments to our customers in Asia and Europe, partially offset by the decline in revenue from a customer in the United States.
Current wording
On a geographic basis, revenues represent products that were shipped to or services that were performed at our customer locations. For the three months ended August 30, 2024 compared to the three months ended August 31, 2023, revenue decreased across all regions, primarily due to a decline in shipments of our systems driven by the recent overall softness in the demand for electric vehicles.
Previous wording
Gross profit decreased to $3.2 million for the three months ended February 29, 2024 from $8.9 million for the three months ended February 28, 2023. Gross margin decreased to 41.7% for the three months ended February 29, 2024 from 51.6% for the three months ended February 28, 2023. The decrease in gross margin of 9.9 percentage points was primarily due to lower shipments resulting in lower manufacturing efficiencies, an increase in costs from design changes, and higher warranty expenses.
Current wording
Gross profit decreased to $7.1 million for the three months ended August 30, 2024 from $10.0 million for the three months ended August 31, 2023. Gross margin increased to 54.0% for the three months ended August 30, 2024 from 48.4% for the three months ended August 31, 2023. The increase in gross margin of 5.6 percentage points was primarily due to a decrease in material cost as a percentage of revenue driven by a product mix shift toward more contactor sales. This was partially offset by lower system shipments resulting in lower manufacturing efficiencies.
Previous wording
Research and development expenses consist primarily of compensation and benefits for product development personnel, outside development service costs, travel expenses, facilities cost allocations, and stock-based compensation charges. Research and development expenses increased to $2.1 million for the three months ended February 29, 2024, compared to $1.8 million for the three months ended February 28, 2023. The increase of $0.3 million was primarily driven by higher non-recurring engineering services charges, an increase in allocated facility cost and higher employment costs due to an increase in headcount. We anticipate our expenses in research and development will fluctuate in absolute dollars from period to period as a result of the timing of product development projects and revenue generating activity requirements.
Current wording
Research and development expenses consist primarily of compensation and benefits for product development personnel, outside development service costs, travel expenses, facilities cost allocations, and stock-based compensation charges. Research and development expenses remained relatively flat at $2.4 million for the three months ended August 30, 2024, compared to $2.5 million for the three months ended August 31, 2023.
Previous wording
Selling, general and administrative expenses consist primarily of compensation and benefits for sales, marketing and general and administrative personnel, legal and accounting service costs, marketing communications costs, travel expenses, facilities cost allocations, and stock-based compensation charges. Selling, general and administrative expenses decreased to $3.1 million for the three months ended February 29, 2024, compared to $3.3 million for the three months ended February 28, 2023. The decrease was primarily due to the reversal of a prior period accrual for bonuses based on revenue and profitability levels that are now not anticipated to be met.
Current wording
Selling, general and administrative expenses consist primarily of compensation and benefits for sales, marketing and general and administrative personnel, legal and accounting service costs, marketing communications costs, travel expenses, facilities cost allocations, and stock-based compensation charges. Selling, general and administrative expenses increased to $4.6 million for the three months ended August 30, 2024, compared to $3.4 million for the three months ended August 31, 2023. The increase was primarily driven by $0.5 million in acquisition related costs, and $0.4 million in additional expenses from the newly acquired business.
Previous wording
Interest and other income (expense), net, primarily consists of interest income and foreign currency transaction exchange gains and losses. Interest and other income (expense), net, increased for the three and nine months ended February 29, 2024, compared to the same periods in the prior year, primarily driven by higher interest income earned due to higher average cash and investment balances and higher yields from our investments in money market funds.
Current wording
Interest and other income (expense), net, primarily consists of interest income and foreign currency transaction exchange gains and losses. Interest and other income (expense), net, increased for the three months ended August 30, 2024, compared to the same periods in the prior year, primarily driven by higher interest income earned due to higher yields from our investments in money market funds.
Previous wording
Cash, cash equivalents, and restricted cash were $47.7 million as of February 29, 2024, compared to $17.3 million as of February 28, 2023. Short term investments were $0 as of February 29, 2024, compared to $25.6 million of February 28, 2023. We believe that our existing cash resources and anticipated funds from operations will satisfy our cash requirements to fund our operating activities, capital expenditures and other obligations for the next twelve months.
Current wording
Cash, cash equivalents, and restricted cash were $40.8 million as of August 30, 2024, compared to $51.1 million as of August 31, 2023. We believe that our existing cash resources and anticipated funds from operations will satisfy our cash requirements to fund our operating activities, capital expenditures and other obligations for the next twelve months.
Previous wording
Cash flow from operating activities during the nine months ended February 29, 2024 mostly consisted of net income, adjusted for certain non-cash items which primarily consisted of depreciation and amortization, share-based compensation expense and amortization of operating lease right-of-use assets. The $3.6 million decrease in cash flows from operating activities for the nine months ended February 29, 2024, compared to the nine months ended February 28, 2023, was driven primarily by an increase in cash used in inventory production and vendor payments due to anticipated customer demand, and a decrease in cash provided by deferred revenue due to timing of customer deposits and revenue recognition, partially offset by an increase in cash provided by collection of accounts receivable and a higher net income.
Current wording
Cash flow from operating activities during the three months ended August 30, 2024 mostly consisted of net income, adjusted for certain non-cash items which primarily consisted of depreciation and amortization, share-based compensation expense and amortization of operating lease right-of-use assets. The $1.5 million decrease in cash flows from operating activities for the three months ended August 30, 2024, compared to the three months ended August 31, 2023, was driven primarily by a lower net income, a decrease in cash provided by deferred revenue due to timing of customer deposits and revenue recognition, a decrease in cash provided by collection of accounts receivable due to the lower revenue and an increase in cash used in prepaid expenses, partially offset by a decrease in cash used in inventory production due to anticipated lower customer demand.
Previous wording
Net cash provided by investing activities increased by $42.8 million for the nine months ended February 29, 2024 compared to the nine months ended February 28, 2023. The increase was primarily due to the maturity of our short-term investments of $18.0 million during the nine months ended February 29, 2024, while the net purchase of short-term investments was $25.3 million during the nine months ended February 28, 2023.
Current wording
Net cash provided by investing activities decreased by $28.5 million for the three months ended August 30, 2024 compared to the three months ended August 31, 2023. The decrease was primarily due to the maturity of our short-term investments of $18.0 million during the three months ended August 31, 2023, while there was no such maturity of investment during the three months ended August 30, 2024. Additionally, the Company paid $10.6 million to acquire Incal during the three months ended August 30, 2024.
Previous wording
Net Cash Flows Provided by (Used in) Financing Activities
Current wording
Net Cash Flows Used in Financing Activities