AEHR TEST SYSTEMS
For the period ended Aug 29, 2025. Filed Oct 8, 2025.
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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 29, 2025 · Filed Oct 8, 2025
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 2025-02-28; filed 2025-04-10.
0001654954-25-004120
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-08-29; filed 2025-10-08.
0001654954-25-011582
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 50 previous paragraphs and 37 current paragraphs.
16 unchanged; 13 reworded; 8 added; 21 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 8 previous and 9 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 (8)
Current report
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. The rapid advancement of generative artificial intelligence (AI) and the accelerating electrification of transportation and global infrastructure represent two of the most significant macro-trends impacting the semiconductor industry today. These transformative forces are driving enormous growth in semiconductor demand while fundamentally increasing the performance, reliability, safety, and security requirements of the devices used across computing and data infrastructure, telecommunications networks, hard disk drive and solid-state storage solutions, electric vehicles, charging systems, and renewable energy generation. As these applications operate at ever-higher power levels and in increasingly mission-critical environments, the need for comprehensive test and burn-in has become more essential than ever. Semiconductor manufacturers are turning to advanced wafer-level and package-level burn-in systems to screen for early-life failures, validate long-term reliability, and ensure consistent performance under extreme electrical and thermal stress. This growing emphasis on reliability testing reflects a fundamental shift in the industry—from simply achieving functionality to guaranteeing dependable operation throughout a product’s lifetime, a requirement that continues to expand alongside the scale and complexity of next-generation semiconductor devices.
Current report
For the three months ended August 29, 2025, revenue decreased by $2.2 million, compared to the same period in the prior year, primarily driven by lower shipments of contactors due to the ongoing softness in demand for electric vehicles. Contactors revenue decreased by $9.5 million, partially offset by an increase in systems revenue of $6.7 million and an increase in service revenue of $0.6 million.
Current report
Gross profit decreased by $3.4 million for the three months ended August 29, 2025, compared to the same period in the prior year, primarily due to lower revenue levels. Gross margin decreased by 20.1 percentage points primarily due to a change in product mix, higher assembly and warranty costs, increased tariffs on imported parts following recent government policy changes, and amortization of acquired intangible assets.
Current report
Restructuring Charges
Current report
Restructuring charges incurred for the three months ended August 29, 2025 primarily related to a workforce reduction implemented to better align our resources with our business needs. For further explanation of our restructuring charges, see Note 10, Restructuring Charges, in Notes to Condensed Consolidated Financial Statements.
Current report
For the three months ended August 29, 2025, the Company recognized $0.8 million income tax benefit, primarily driven by year-to-date losses in the United States. For the three months ended August 30, 2024, income tax expense was primarily due to taxable income in the United States and in profitable foreign subsidiaries.
Current report
Net cash used in investing activities decreased by $9.4 million for the three months ended August 29, 2025 compared to the same period in the prior year. The decrease was primarily due to the $10.6 million payment to acquire Incal during the three months ended August 30, 2024, partially offset by a $1.2 million increase in cash spending on property and equipment, primarily related to office renovation.
Current report
Net cash used in financing activities did not change materially for the three months ended August 29, 2025, compared to the same period in the prior year.
Removed paragraphs (21)
Previous report
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, generative AI 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 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.
Previous 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.
Previous 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.
Previous report
We have not recorded any impairment charges during the three and nine months ended February 28, 2025 and February 29, 2024.
Previous report
Fiscal Year
Previous 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 third fiscal quarter in fiscal 2025 ended on February 28, 2025, and our fiscal year 2025 will end on May 30, 2025.
Previous report
Impact of Acquisition
Previous report
We completed the acquisition of Incal Technology, Inc. (“Incal”) on July 31, 2024. We may quantitatively disclose the impact of the revenue and expense contributions from the acquisition where such discussions are significant to understanding our financial results.
Previous report
Revenue increased to $18.3 million for the three months ended February 28, 2025 from $7.6 million for the three months ended February 29, 2024. This revenue growth was driven by an increase in shipments of our systems and contactors, primarily due to deliveries of the FOX-XP systems and contactors to a new semiconductor customer that focuses on artificial intelligence and a major Gallium Nitride power semiconductor supplier. Additionally, there was an increase in package parts burn-in products revenue of $3.5 million in connection with the Incal acquisition further contributing to the higher revenue.
Previous report
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 report
For the nine months ended February 28, 2025 compared to the nine months ended February 29, 2024, revenue declined in Asia primarily due to continued softness in the power semiconductor demand for electric vehicles. This decline was partially offset by revenue growth in the United States, driven by systems and contactors sales to customers that focus on the artificial intelligence market.
Previous report
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 report
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 report
Research and development expenses increased to $7.8 million for the nine months ended February 28, 2025, compared to $ 6.6 million for the nine months ended February 29, 2024, primarily due to the severance benefits incurred following the passing of an executive officer, higher employee costs, stock-based compensation expense, and increased license subscription fees resulting from growth in engineering headcount. The increase was partially offset by lower non-recurring engineering service charges.
Previous report
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 report
N.M. – not meaningful
Previous report
N.M. – not meaningful
Previous report
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 report
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 report
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.
Reworded paragraphs (13)
Previous wording
In connection with the acquisition of Incal Technology, Inc. (“Incal”), our product portfolio further expanded to include packaged parts burn-in solutions for the full range of power and complexity of integrated circuits. Incal’s product lines feature the Sonoma series for ultra-high-power burn-in testing, the Tahoe series for medium-power reliability burn-in, and the Echo series for low-power and high parallelism testing. The Sonoma line, with its ultra-high-power capabilities, is specifically designed to address the reliability and burn-in needs of the burgeoning demand for AI accelerators, GPUs, high-performance computing (HPC) processors, and devices that can reach levels of power as high as 1600W. The Sonoma is available in its standard configuration, which hosts up to 22 slots per chamber, and in its production version, which has 12 slots per chamber. The Tahoe and Echo lines for medium-power and low-power burn-in solutions, respectively, target logic, SoC, and mixed-signal devices employed in mobile communications, mobility, medical, military, aerospace, and data center applications. These systems are frequently used by independent test and burn-in labs, as well as semiconductor manufacturers.
Current wording
In connection with the acquisition of Incal Technology, Inc. (“Incal”), our product portfolio further expanded to include packaged parts burn-in solutions for the full range of power and complexity of integrated circuits. Incal’s product lines feature the Sonoma series for ultra-high-power burn-in testing, the Tahoe series for medium-power reliability burn-in, and the Echo series for low-power and high parallelism testing. The Sonoma line, with its ultra-high-power capabilities, is specifically designed to address the reliability and burn-in needs of the burgeoning demand for AI accelerators, graphics processing units (“GPUs”), high-performance computing (“HPC”) processors, and devices that can reach over a thousand watts of power per device. The Tahoe and Echo lines for medium-power and low-power burn-in solutions, respectively, target logic, system on a chip (“SoC”), and mixed-signal devices employed in mobile communications, mobility, medical, military, aerospace, and data center applications. These systems are frequently used by independent test and burn-in labs, as well as semiconductor manufacturers.
Previous wording
Our net revenue consists primarily of sales of FOX-P systems, Sonoma/Tahoe/Echo systems, WaferPak Aligners and DiePak Loaders, WaferPak contactors, DiePak carriers, test fixtures, upgrades and spare parts, service contracts revenues, and non-recurring engineering charges. Our selling arrangements may include contractual customer acceptance provisions, which are mostly deemed perfunctory or inconsequential, and installation of the product occurs after shipment, transfer of title and risk of loss.
Current wording
Our net revenue consists primarily of sales of FOX-P systems, WaferPak Aligners and DiePak Loaders, WaferPak contactors, DiePak carriers, Sonoma systems, Tahoe systems, Echo systems, test fixtures, upgrades and spare parts, service contracts revenues, and non-recurring engineering charges. Our selling arrangements may include contractual customer acceptance provisions, which are mostly deemed perfunctory or inconsequential, and installation of the product occurs after shipment, transfer of title and risk of loss.
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 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.
Current wording
There have been no material changes to our critical accounting policies and estimates during the three months ended August 29, 2025, compared to those discussed in our Annual Report on Form 10-K for the fiscal year ended May 30, 2025.
Previous 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
Current wording
Discussion of Results of Operations for the Three Months Ended August 29, 2025 compared to the Three Months Ended August 30, 2024
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 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.
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 29, 2025, compared to the same period in the prior year, revenue decreased in Asia due to the ongoing softness in demand for electric vehicles, which was partially offset by increases in FOX-P systems sold in the United States, Europe and Middle East.
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 $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.
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 by $0.5 million for the three months ended August 29, 2025, compared to the same period in the prior year. The increase was primarily driven by higher employment-related costs, including stock-based compensation, which resulted from increased headcount.
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 $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.
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 remained consistent for the three months ended August 29, 2025, compared to the same period in the prior year, as higher stock-based compensation was partially offset by lower legal fees.
Previous wording
Interest and Other Income, Net
Current wording
Interest and Other Income (Expense), Net
Previous 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.
Current wording
Interest and other income (expense), net, primarily consists of interest income, foreign currency transaction exchange gains and losses and other non-operating income and expense. Interest income, net, decreased by $0.5 million for the three months ended August 29, 2025, compared to the same period in the prior year, primarily driven by lower interest income earned on a lower average cash balances and lower yields from our investments in money market funds. Other income (expense), net, increased by $1.1 million for the three months ended August 29, 2025, compared to the same period in the prior year, primarily attributable to the Employee Retention Credit (“ERC”) refund of $1.3 million received, net of a $0.3 million third-party service fee incurred in connection with the filing of the ERC claims during the three months ended August 29, 2025. For further explanation of the ERC, see Note 11, Employee Retention Credit, in Notes to Condensed Consolidated Financial Statements.
Previous 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.
Current wording
Cash, cash equivalents, and restricted cash were $24.7 million as of August 29, 2025, compared to $40.8 million as of August 30, 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 $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.
Current wording
The $2.7 million decrease in cash flows from operating activities for the three months ended August 29, 2025, compared to the same period in the prior year, was driven primarily by a lower income (loss) before income tax (benefit), a decrease in cash provided by deferred revenue due to timing of customer deposits and revenue recognition, an increase in cash used to pay down accounts payable, and a decrease in cash provided by collection of accounts receivable due to the lower revenue, partially offset by a decrease in cash used in inventory purchase due to anticipated lower customer demand, a decrease in cash used in prepaid expenses and higher non-cash charges including stock-based compensation expense and depreciation and amortization.
Previous wording
Net Cash Flows Provided by (Used in) Investing Activities
Current wording
Net Cash Flows Used in Investing Activities
Previous wording
Net Cash Flows Provided by (Used in) Financing Activities
Current wording
Net Cash Flows Used in Financing Activities