Aehr Test(AEHR) - 2025 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Unaudited Q1 FY2025 financial statements reflect significant revenue and net income declines, balance sheet growth from the Incal acquisition, and reduced operating cash flow Condensed Consolidated Balance Sheets Total assets increased to $145.9 million driven by the Incal acquisition's goodwill and intangible assets, while cash decreased and liabilities and equity grew Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Aug 30, 2024 | May 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $37,830 | $49,159 | | Inventories | $42,973 | $37,470 | | Goodwill | $10,353 | $0 | | Intangible assets, net | $11,854 | $0 | | Total assets | $145,862 | $127,912 | | Liabilities & Equity | | | | Total current liabilities | $15,420 | $10,508 | | Total liabilities | $23,379 | $16,319 | | Total shareholders' equity | $122,483 | $111,593 | | Total liabilities and shareholders' equity | $145,862 | $127,912 | Condensed Consolidated Statements of Operations Q1 FY2025 saw a 36% revenue decline to $13.1 million and an 85.9% drop in net income to $0.7 million, with diluted EPS falling to $0.02 Quarterly Statement of Operations (in thousands, except per share data) | Metric | Q1 FY2025 (ended Aug 30, 2024) | Q1 FY2024 (ended Aug 31, 2023) | Change YoY | | :--- | :--- | :--- | :--- | | Total Revenue | $13,119 | $20,624 | -36.4% | | Gross Profit | $7,078 | $9,981 | -29.1% | | Gross Margin | 54.0% | 48.4% | +5.6 p.p. | | Income from Operations | $159 | $4,115 | -96.1% | | Net Income | $660 | $4,674 | -85.9% | | Diluted EPS | $0.02 | $0.16 | -87.5% | Condensed Consolidated Statements of Cash Flows Operating cash flow decreased to $2.4 million, while investing activities used $10.8 million primarily for the Incal acquisition, resulting in an $8.5 million net cash decrease Quarterly Cash Flow Summary (in thousands) | Cash Flow Category | Three Months Ended Aug 30, 2024 | Three Months Ended Aug 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,380 | $3,901 | | Net cash provided by (used in) investing activities | $(10,812) | $17,716 | | Net cash used in financing activities | $(106) | $(694) | | Net increase (decrease) in cash | $(8,529) | $20,901 | - The primary use of cash in investing activities was $10.6 million for the acquisition of Incal Technology, Inc., net of cash acquired[10] Notes to Condensed Consolidated Financial Statements Notes detail the $21.9 million Incal acquisition, significant customer concentration, a major product mix shift, and a change in fiscal year-end - On July 31, 2024, the Company acquired Incal Technology, Inc. for a total consideration of approximately $21.9 million, consisting of cash, restricted common stock, and an escrow payable. The acquisition resulted in the recognition of $10.4 million in goodwill and $12.0 million in intangible assets[29][33] - The company exhibits significant customer concentration, with a single customer (Customer A) accounting for 90.8% of total revenues for the three months ended August 30, 2024, up from 88.0% in the prior-year period[25] Revenue by Product Category (in thousands) | Product Category | Q1 FY2025 | Q1 FY2024 | Change YoY | | :--- | :--- | :--- | :--- | | Systems | $60 | $8,093 | -99.3% | | Contactors | $12,094 | $11,264 | +7.4% | | Services | $965 | $1,267 | -23.8% | | Total | $13,119 | $20,624 | -36.4% | - Beginning June 1, 2024, the Company changed its fiscal year to a 52- or 53-week period ending on the Friday nearest May 31[15] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 36% revenue decline to EV market softness, notes improved gross margin due to product mix, and highlights increased operating expenses from the Incal acquisition Results of Operations Revenue declined 36% to $13.1 million due to EV market softness, while gross margin improved to 54.0% from product mix, and SG&A expenses rose due to acquisition costs - The decrease in revenue was attributed to a decline in system and service shipments, driven by recent overall softness in the demand for electric vehicles[99] - The increase in gross margin was primarily due to a decrease in material cost as a percentage of revenue, driven by a product mix shift toward more contactor sales[102] - The increase in SG&A expenses was primarily driven by $0.5 million in acquisition-related costs and $0.4 million in additional expenses from the newly acquired Incal business[104] Liquidity and Capital Resources Cash, cash equivalents, and restricted cash totaled $40.8 million, with a net decrease of $8.5 million primarily due to the $10.6 million Incal acquisition and lower operating cash flow - Cash, cash equivalents, and restricted cash were $40.8 million as of August 30, 2024[108] - The decrease in cash from investing activities was primarily due to the $10.6 million payment to acquire Incal and the absence of maturing short-term investments, which had provided $18.0 million in the prior-year period[111] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is exempt from providing quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[114] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of August 30, 2024, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of August 30, 2024[114] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls[115] PART II OTHER INFORMATION Item 1. Legal Proceedings The company is involved in routine legal proceedings but anticipates no material adverse effect on its financial position or results - The company accrues for litigation losses when a loss is probable and can be reasonably estimated, but is not currently aware of any proceedings expected to have a material adverse effect[116] Item 1A. Risk Factors No material changes have occurred to the significant risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes to the risk factors previously disclosed in the Form 10-K for the fiscal year ended May 31, 2024, have occurred[116] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - None[116] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL data files