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AEHR Test Systems Quarterly Report (10-Q)

Press release·03/03/2025 09:55:16
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AEHR Test Systems Quarterly Report (10-Q)

AEHR Test Systems Quarterly Report (10-Q)

AEHR Test Systems reported its financial results for the quarter ended November 29, 2024. The company’s revenue increased by 15% to $43.1 million, driven by strong demand for its test and measurement solutions. Gross profit margin expanded to 64.1% from 62.5% in the prior year period, while operating expenses increased by 12% to $24.5 million. Net income rose to $6.3 million, or $0.21 per diluted share, compared to $4.5 million, or $0.15 per diluted share, in the same period last year. The company’s cash and cash equivalents stood at $54.1 million as of November 29, 2024, with no debt outstanding.

Overview

We are a leading provider of test solutions for testing, burning-in, and stabilizing semiconductor devices. Decarbonization, generative AI, and digitalization are 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. This trend is driving additional test requirements, incremental capacity needs, and new opportunities for our test products and solutions.

We have developed and introduced several innovative products, including the FOX-P family of test and burn-in systems, FOX WaferPak Aligner, FOX WaferPak Contactor, FOX DiePak Carrier, and FOX DiePak Loader. These systems can test, burn-in, and stabilize a wide range of devices such as power semiconductors, sensors, memory, processors, and photonics devices.

In 2024, we acquired Incal Technology, Inc., which expanded our product portfolio 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.

Our net revenue consists primarily of sales of systems, contactors, test fixtures, upgrades, spare parts, service contracts, and non-recurring engineering charges.

Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations are based on our Condensed Consolidated Financial Statements, which require us to make estimates and judgments that affect the reported amounts. We have identified two critical accounting estimates related to Business Combinations and Impairment of Goodwill and Long-lived Assets.

For Business Combinations, we make significant estimates and assumptions to determine the fair values of assets acquired and liabilities assumed at the acquisition date, including future expected cash flows, revenue growth rates, royalty rates, and discount rates.

For Impairment of Goodwill, we assess goodwill for impairment annually or whenever events or changes in circumstances indicate the carrying value may not be fully recoverable. The process involves significant judgment, including evaluating qualitative factors and performing a quantitative test to compare the fair value of the reporting unit to its carrying value.

For Impairment of Long-Lived Assets, we monitor the carrying value of long-lived assets for potential impairment each quarter based on whether certain triggering events have occurred, such as current period losses, a history of losses, or a significant decrease in the market value of an asset.

Results of Operations

Fiscal Year Beginning in fiscal 2025, we have changed our fiscal year to the 52- or 53-week period ending on the Friday nearest May 31.

Impact of Acquisition We completed the acquisition of Incal Technology, Inc. on July 31, 2024, and we may quantitatively disclose the impact of the revenue and expense contributions from the acquisition where such discussions are significant.

Revenues Revenue decreased by 37% for both the three and six months ended November 29, 2024, compared to the same periods in the prior year. The decrease was driven by a decline in shipments of our systems and contactors, as well as reduced delivery of our services, primarily due to the continued softness in the power semiconductor demand for electric vehicles.

On a geographic basis, revenue decreased in Asia and Europe, but increased in the United States, driven by contributions from Incal customers.

Gross Margin Gross profit and gross margin decreased for the three and six months ended November 29, 2024, compared to the same periods in the prior year. The decreases were 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.

Research and Development Research and development expenses increased for the three and six months ended November 29, 2024, compared to the same periods in the prior year, primarily driven by higher employment costs and increased license subscription fees due to an increase in headcount.

Selling, General and Administrative Selling, general and administrative expenses increased for the three and six months ended November 29, 2024, compared to the same periods in the prior year. The increases were primarily driven by additional expenses from the newly acquired business, higher stock-based compensation expenses, and increased professional service fees.

Interest and Other Income, Net 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.

Income Tax Expense (Benefit) 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.

Liquidity and Capital Resources 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. The decrease in cash was primarily due to cash used in operating activities, the acquisition of Incal, and the maturity of short-term investments in the prior year. The Company believes its existing cash resources and anticipated funds from operations will satisfy its cash requirements for the next twelve months.

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