AEHR TEST SYSTEMS

Previous 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 six months ended November 29, 2024 compared to those discussed in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024.

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 nine months ended February 28, 2025 compared to those discussed in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024.

Previous wording

We have not recorded any impairment charges during the three and six months ended November 29, 2024 and November 30, 2023.

Current wording

We have not recorded any impairment charges during the three and nine months ended February 28, 2025 and February 29, 2024.

Previous wording

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 second fiscal quarter in fiscal 2025 ended on November 29, 2024, and our fiscal year 2025 will end on May 30, 2025.

Current wording

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 third fiscal quarter in fiscal 2025 ended on February 28, 2025, and our fiscal year 2025 will end on May 30, 2025.

Previous wording

Discussion of Results of Operations for the Three and Six Months Ended November 29, 2024 compared to the Three and Six Months Ended November 30, 2023

Current wording

Discussion of Results of Operations for the Three and Nine Months Ended February 28, 2025 compared to the Three and Nine Months Ended February 29, 2024

Previous wording

Revenue decreased to $26.6 million for the six months ended November 29, 2024 from $42.1 million for the six months ended November 30, 2023, driven by a decrease in shipments of our systems and in delivery of our services due to the continued softness in the power semiconductor demand for electric vehicles. Our systems revenue decreased by $15.3 million due to the decrease in our FOX-P systems revenue, which was partially offset by the increase in package parts burn-in systems revenue of $5.0 million in connection with the Incal acquisition. Our services revenue decreased by $0.4 million and was partially offset by an increase in our contactors revenue of $0.2 million.

Current wording

Revenue decreased to $44.9 million for the nine months ended February 28, 2025 from $49.6 million for the nine months ended February 29, 2024, driven by a decrease in shipments of our systems primarily due to the continued softness in the power semiconductor demand for electric vehicles. Our systems revenue decreased by $6.5 million due to the decrease in our FOX-P systems revenue, which was partially offset by the increase in package parts burn-in systems revenue in connection with the Incal acquisition. The decline in systems revenue was partially offset by an increase in our contactors revenue of $1.4 million and services revenue of $0.4 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 and six months ended November 29, 2024 compared to the three and six months ended November 30, 2023, revenue decreased in Asia and Europe, primarily due to a decline in shipments of our systems driven by the continued softness in the power semiconductor demand for electric vehicles. This was partially offset by an increase in revenue in the United States, driven by contributions from Incal customers.

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 February 28, 2025 compared to the three months ended February 29, 2024, revenue increased in the United States and Europe, primarily due to higher deliveries of the systems and contactors to customers in these regions.

Previous wording

Gross profit decreased to $5.4 million for the three months ended November 29, 2024 from $11.0 million for the three months ended November 30, 2023. Gross margin decreased to 40.1% for the three months ended November 29, 2024 from 51.1% for the three months ended November 30, 2023. The decrease in gross margin of 11.0 percentage points was primarily due to the amortization of acquired intangible assets, the acquisition related fair value adjustment to inventory, lower system shipments leading to reduced manufacturing efficiencies, and a change in product mix.

Current wording

Gross profit increased to $7.2 million for the three months ended February 28, 2025 from $3.2 million for the three months ended February 29, 2024, driven by revenue growth. Gross margin decreased to 39.2% for the three months ended February 28, 2025 from 41.7% for the three months ended February 29, 2024. The decrease in gross margin of 2.5 percentage points was primarily due to the amortization of acquired intangible assets and a one-time inventory variance charge.

Previous wording

Gross profit decreased to $12.5 million for the six months ended November 29, 2024 from $20.9 million for the six months ended November 30, 2023. Gross margin decreased to 47.0% for the six months ended November 29, 2024 from 49.8% for the six months ended November 30, 2023. The 2.8 percentage point decrease in gross margin was primarily due to the amortization of acquired intangible assets, the acquisition related fair value adjustment to inventory, lower system shipments leading to reduced manufacturing efficiencies, and a change in product mix.

Current wording

Gross profit decreased to $19.7 million for the nine months ended February 28, 2025 from $24.1 million for the nine months ended February 29, 2024. Gross margin decreased to 43.8% for the nine months ended February 28, 2025 from 48.6% for the nine months ended February 29, 2024. The 4.8 percentage point decrease in gross margin was primarily due to the amortization of acquired intangible assets, the acquisition related fair value adjustment to inventory, a one-time inventory variance charge, lower system shipments leading to reduced manufacturing efficiencies, and a change in product mix.

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 $2.3 million for the three months ended November 29, 2024, compared to $2.0 million for the three months ended November 30, 2023. The increase of $0.3 million was primarily driven by higher employment costs and increased license subscription fees due to an increase in headcount.

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 increased to $3.1 million for the three months ended February 28, 2025, compared to $2.1 million for the three months ended February 29, 2024. The increase of $1.0 million was primarily driven by the severance benefits incurred following the passing of an executive officer, and the recruiting fees for hiring his replacement.

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 increased to $4.6 million for the three months ended November 29, 2024, compared to $3.5 million for the three months ended November 30, 2023. The increase was primarily driven by a $0.7 million in additional expenses from the newly acquired business, a $0.3 million increase in stock-based compensation expenses and higher professional service fees.

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 $5.2 million for the three months ended February 28, 2025, compared to $3.1 million for the three months ended February 29, 2024. The increase was primarily driven by higher legal fees related to the current legal cases in China and in the United States, additional expenses from the newly acquired business, and higher employee-related expenses, including stock-based compensation expense.

Previous wording

Selling, general and administrative expenses increased to $9.2 million for the six months ended November 29, 2024, compared to $6.9 million for the six months ended November 30, 2023. The increase was primarily driven by $1.1 million in additional selling, general and administrative expenses from the newly acquired business, $0.5 million in acquisition related costs and a $0.6 million increase in stock-based compensation expenses.

Current wording

Selling, general and administrative expenses increased to $14.4 million for the nine months ended February 28, 2025, compared to $10.0 million for the nine months ended February 29, 2024. The increase was primarily driven by additional selling, general and administrative expenses from the newly acquired business, higher legal and other professional service fees, and higher employee-related expenses, including stock-based compensation expense.

Previous wording

Interest and other income, net, primarily consists of interest income and foreign currency transaction exchange gains and losses. Interest and other income, net, decreased for the three and six months ended November 29, 2024, compared to the same periods in the prior year, primarily driven by lower interest income earned due to lower average cash balances and lower yields from our investments in money market funds.

Current wording

Interest and other income, net, which primarily consists of interest income and foreign currency transaction exchange gains and losses. Interest and other income, net, decreased for the three and nine months ended February 28, 2025, compared to the same periods in the prior year, primarily driven by lower interest income earned due to lower average cash balances primarily driven by $11.1 million spent on the acquisition of Incal and lower yields from our investments in money market funds.

Previous wording

For the three and six months ended November 29, 2024, the Company recognized an income tax benefit due to quarter-to-date and year-to-date losses in the U.S. For the three and six months ended November 30, 2023, income tax expense was primarily related to foreign operations as the Company maintained a full valuation allowance on all the U.S. net deferred tax assets through the first six months of fiscal 2024.

Current wording

For the three and nine months ended February 28, 2025, the Company recognized an income tax benefit due to quarter-to-date and year-to-date losses in the U.S. For the three and nine months ended February 29, 2024, income tax expense was primarily related to foreign operations as the Company maintained a full valuation allowance on all the U.S. net deferred tax assets through the first nine months of fiscal 2024.

Previous wording

Cash, cash equivalents, and restricted cash were $35.2 million as of November 29, 2024, compared to $50.7 million as of November 30, 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 $31.4 million as of February 28, 2025, compared to $47.7 million as of February 29, 2024. 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

The $6.8 million decrease in cash flows from operating activities for the six months ended November 29, 2024, compared to the six months ended November 30, 2023, was driven primarily by a net loss in the current period, compared to a net income in the prior period, and a decrease in cash provided by collection of accounts receivable due to lower revenue, which were partially offset by a decrease in cash used in procuring inventory and payments to vendors and a smaller reduction in deferred revenue due to timing of customer deposits and revenue recognition.

Current wording

The $5.6 million decrease in cash flows from operating activities for the nine months ended February 28, 2025, compared to the nine months ended February 29, 2024, was driven primarily by a net loss in the current period, compared to a net income in the prior period, a decrease in cash provided by collection of accounts receivable due to lower revenue and an increase in unbilled receivables and prepayments, which were partially offset by a decrease in cash used in procuring inventory and payments to vendors, a smaller reduction in deferred revenue due to timing of customer deposits and revenue recognition, and higher non-cash expenses including stock-based compensation expense, depreciation and amortization.

Previous wording

Net cash used in investing activities increased by $28.7 million for the six months ended November 29, 2024 compared to the six months ended November 30, 2023. The increase in net cash used was primarily due to the maturity of our short-term investments of $18.0 million during the six months ended November 30, 2023, while there was no such maturity of investment during the six months ended November 29, 2024. Additionally, the Company paid $10.6 million to acquire Incal during the six months ended November 29, 2024.

Current wording

Net cash used in investing activities increased by $30.5 million for the nine months ended February 28, 2025 compared to the nine months ended February 29, 2024. The increase in net cash used was primarily due to the maturity of our short-term investments of $18.0 million during the nine months ended February 29, 2024, while there was no such maturity of investment during the nine months ended February 28, 2025. Additionally, the Company paid $11.1 million to acquire Incal, including approximately $0.5 million after the closing date to release escrow cash to the seller, and increased spending in property and equipment for office renovation during the nine months ended February 28, 2025.

Previous wording

Net cash provided by financing activities increased by $0.9 million for the six months ended November 29, 2024, compared to the six months ended November 30, 2023. The increase was primarily due to a reduction in shares repurchased for tax withholdings on vesting of restricted stock units, partially offset by a reduction in proceeds from issuance of common stock under employee plans.

Current wording

Net cash provided by financing activities increased by $0.7 million for the nine months ended February 28, 2025, compared to the nine months ended February 29, 2024. The increase was primarily due to a reduction in shares repurchased for tax withholdings on vesting of restricted stock units, partially offset by a reduction in proceeds from issuance of common stock under employee plans.