Aehr Test(AEHR) - 2026 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for Aehr Test Systems Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Aehr Test Systems, including balance sheets, statements of operations, comprehensive income (loss), shareholders' equity, and cash flows, along with accompanying notes Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's financial position, detailing assets, liabilities, and shareholders' equity at specific points in time Assets Measured at Fair Value (August 29, 2025) | (In thousands) | August 29, 2025 | May 30, 2025 | | :--- | :--- | :--- | | Total assets | $144,092 | $148,508 | | Total current assets | $84,052 | $88,778 | | Cash and cash equivalents | $22,708 | $24,529 | | Total liabilities | $21,698 | $25,637 | | Total shareholders' equity | $122,394 | $122,871 | - Total assets decreased by $4.4 million, and total shareholders' equity decreased by $0.5 million from May 30, 2025, to August 29, 2025[9][10] Condensed Consolidated Statements of Operations This statement presents the company's revenues, expenses, and net income or loss over a specific period, reflecting operational performance Condensed Consolidated Statements of Operations | (In thousands, except per share data) | Three Months Ended August 29, 2025 | Three Months Ended August 30, 2024 | | :--- | :--- | :--- | | Revenue | $10,969 | $13,119 | | Gross profit | $3,719 | $7,078 | | Income (loss) from operations | $(4,066) | $159 | | Net income (loss) | $(2,084) | $660 | | Basic Net income (loss) per share | $(0.07) | $0.02 | | Diluted Net income (loss) per share | $(0.07) | $0.02 | - Revenue decreased by 16% and gross profit decreased by 47% year-over-year. The company reported a net loss of $2.1 million for the three months ended August 29, 2025, compared to a net income of $0.7 million in the prior year period[12] Condensed Consolidated Statements of Comprehensive Income (Loss) This statement reports net income or loss and other comprehensive income or loss, providing a complete view of changes in equity from non-owner sources Condensed Consolidated Statements of Comprehensive Income (Loss) | (In thousands) | Three Months Ended August 29, 2025 | Three Months Ended August 30, 2024 | | :--- | :--- | :--- | | Net income (loss) | $(2,084) | $660 | | Net change in cumulative translation adjustment | $31 | $24 | | Comprehensive income (loss) | $(2,053) | $684 | - Comprehensive income shifted from a gain of $0.7 million in the prior year to a loss of $2.1 million for the three months ended August 29, 2025[13][15] Condensed Consolidated Statements of Shareholders' Equity This statement details changes in shareholders' equity, including net income, stock-based compensation, and stock transactions, over a period Condensed Consolidated Statements of Shareholders' Equity | (In thousands) | Balances, May 30, 2025 | Balances, August 29, 2025 | | :--- | :--- | :--- | | Total Shareholders' Equity | $122,871 | $122,394 | | Net loss | - | $(2,084) | | Stock-based compensation | - | $1,734 | | Issuance of common stock under employee plans | - | $170 | | Shares repurchased for tax withholdings | - | $(328) | - Total shareholders' equity decreased from $122.9 million to $122.4 million during the quarter, primarily due to the net loss of $2.1 million, partially offset by stock-based compensation and common stock issuance[16] Condensed Consolidated Statements of Cash Flows This statement categorizes cash inflows and outflows from operating, investing, and financing activities, showing liquidity changes Condensed Consolidated Statements of Cash Flows | (In thousands) | Three Months Ended August 29, 2025 | Three Months Ended August 30, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(282) | $2,380 | | Net cash used in investing activities | $(1,391) | $(10,812) | | Net cash used in financing activities | $(158) | $(106) | | Net decrease in cash, cash equivalents and restricted cash | $(1,822) | $(8,529) | | Cash, cash equivalents and restricted cash, end of period | $24,658 | $40,780 | - Operating activities shifted from providing $2.4 million in cash to using $0.3 million. Investing activities used significantly less cash ($1.4 million vs. $10.8 million) due to the absence of a business acquisition in the current period[18][19] Notes to Condensed Consolidated Financial Statements These notes provide additional details and explanations for the figures presented in the financial statements, enhancing transparency 1. Organization and Significant Accounting Policies This note describes Aehr Test Systems' organization, its primary business of developing and manufacturing semiconductor test and burn-in equipment, and the basis of presentation for the unaudited condensed consolidated financial statements - The Company develops and manufactures test and burn-in equipment for the semiconductor industry, including FOX-XP, FOX-NP, FOX-CP wafer contact and singulated die/module systems, and packaged parts burn-in products like Sonoma, Tahoe, and Echo[21] - No significant changes to critical accounting policies were made during the three months ended August 29, 2025[24] Revenue Concentration by Customer | Customer | Three Months Ended August 29, 2025 | Three Months Ended August 30, 2024 | | :--- | :--- | :--- | | Customer A | 42.6% | * | | Customer B | 21.8% | * | | Customer C | 11.6% | 90.8% | Accounts Receivable Concentration by Customer | Customer | August 29, 2025 | May 30, 2025 | | :--- | :--- | :--- | | Customer A | 22.1% | * | | Customer B | 18.2% | * | | Customer D | 20.8% | 26.2% | | Customer E | 17.8% | 17.2% | 2. Fair Value of Financial Instruments This note details the Company's financial instruments measured at fair value, primarily money market funds, which are classified as Level 1 in the fair value hierarchy Assets Measured at Fair Value (August 29, 2025) | (In thousands) | Balance as of August 29, 2025 | Level 1 | | :--- | :--- | :--- | | Money market funds | $20,863 | $20,863 | | Total | $20,863 | $20,863 | Assets Measured at Fair Value (May 30, 2025) | (In thousands) | Balance as of May 30, 2025 | Level 1 | | :--- | :--- | :--- | | Money market funds | $21,461 | $21,461 | | Total | $21,461 | $21,461 | - All money market funds are classified as Level 1 fair value measurements, indicating observable inputs from active markets[30][33] 3. Balance Sheet Information This note provides detailed breakdowns of inventories, property and equipment, and changes in product warranty liabilities and deferred revenue Inventories Breakdown | (In thousands) | August 29, 2025 | May 30, 2025 | | :--- | :--- | :--- | | Raw materials and sub-assemblies | $32,609 | $30,644 | | Work in process | $8,674 | $9,263 | | Finished goods | $559 | $2,090 | | Total | $41,842 | $41,997 | Property and Equipment, Net | (In thousands) | August 29, 2025 | May 30, 2025 | | :--- | :--- | :--- | | Total Property and equipment, gross | $14,835 | $14,436 | | Less: accumulated depreciation | $(5,834) | $(5,467) | | Property and equipment, net | $9,001 | $8,969 | Product Warranty Liability Changes | (In thousands) | Three Months Ended August 29, 2025 | Three Months Ended August 30, 2024 | | :--- | :--- | :--- | | Balance at the beginning of the period | $428 | $234 | | Accruals for warranties issued | $169 | $178 | | Adjustments to previously existing accruals | $204 | - | | Consumption of reserves | $(291) | $(193) | | Balance at the end of the period | $510 | $219 | - Deferred revenue, short-term, decreased from $1.98 million to $1.12 million, primarily due to a reduction in customer deposits[41] 4. Goodwill and Purchased Intangible Assets This note provides details on goodwill and purchased intangible assets. There were no impairments to goodwill or purchased intangible assets during the reported periods. The net value of purchased intangible assets decreased slightly due to amortization - No impairments to goodwill were recorded during the three months ended August 29, 2025, or August 30, 2024[43] Purchased Intangible Assets, Net | (In thousands) | August 29, 2025 Net | May 30, 2025 Net | | :--- | :--- | :--- | | Developed technology | $8,306 | $8,496 | | Trade names | $936 | $962 | | Customer relationships | $730 | $749 | | Non-compete agreements and others | $467 | $574 | | Total | $10,439 | $10,781 | - Amortization expense for purchased intangible assets was $0.3 million for the three months ended August 29, 2025, an increase from $0.1 million in the prior year period[44] 5. Income Taxes This note details the Company's income tax expense (benefit) and effective tax rate. The Company recognized an income tax benefit for the current quarter due to year-to-date losses in the U.S., a significant change from the prior year's tax expense Income Taxes Details | (In thousands) | Three Months Ended August 29, 2025 | Three Months Ended August 30, 2024 | | :--- | :--- | :--- | | Income (loss) before income tax expense (benefit) | $(2,836) | $814 | | Income tax expense (benefit) | $(752) | $154 | | Effective tax rate | 26.5% | 18.9% | - The Company recognized a tax benefit of $0.8 million for the three months ended August 29, 2025, primarily due to year-to-date losses in the United States, contrasting with a tax expense of $0.2 million in the prior year[46][47] 6. Commitments and Contingencies This note outlines the Company's purchase obligations and various contingencies, including legal proceedings. It reports the voluntary dismissal of a shareholder class action lawsuit and the dismissal of consolidated derivative actions. It also details ongoing intellectual property litigation in China - A putative shareholder class action lawsuit and consolidated shareholder derivative complaints were voluntarily dismissed or dismissed without prejudice, with no related proceedings currently pending[52] - The Company is actively pursuing intellectual property rights in China against Suzhou Semight Instruments Co., Ltd. for patent infringement, with infringement proceedings having resumed after patents were upheld[53] - The Company indemnifies other parties, including customers, for certain matters, but payments made to date have not had a material impact on financial results[54][56] 7. Shareholders' Equity This note discusses activities related to shareholders' equity, specifically the authorization of a $100 million shelf registration and a $40 million ATM offering program. No proceeds were raised from the ATM offering during fiscal 2025 - The Board of Directors authorized a $100 million shelf registration and a $40 million ATM offering program, with $40 million remaining as of August 29, 2025[57] - No proceeds were raised from the ATM offering during fiscal 2025[57] 8. Revenue This note details the Company's revenue recognition policies and disaggregates revenue by geographic area and product category. It highlights a significant shift in revenue contribution from Asia to the United States and Europe/Middle East, and from contactors to systems - Revenue is recognized when promised goods or services are transferred to customers, typically at a point in time for systems and spares, and over time for services[58][60] Revenue Disaggregation by Geography | (In thousands) | Three Months Ended August 29, 2025 | Three Months Ended August 30, 2024 | | :--- | :--- | :--- | | United States | $4,812 | $523 | | Europe and Middle East | $3,681 | $18 | | Asia | $2,476 | $12,578 | | Total | $10,969 | $13,119 | Revenue Disaggregation by Product Category | (In thousands) | Three Months Ended August 29, 2025 | Three Months Ended August 30, 2024 | | :--- | :--- | :--- | | Systems | $6,764 | $60 | | Contactors | $2,613 | $12,094 | | Services | $1,592 | $965 | | Total | $10,969 | $13,119 | - Unbilled receivables decreased from $3.6 million to $1.5 million, and contract liabilities decreased from $2.0 million to $1.2 million[64][65] 9. Stock-Based Compensation This note outlines the Company's stock-based compensation plans and the expense recognized. Stock-based compensation expense significantly increased year-over-year, and the number of unvested awards grew Stock-Based Compensation Expense | (In thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Cost of sales | $159 | $93 | | Research and development | $365 | $208 | | Selling, general and administrative | $1,147 | $569 | | Total | $1,671 | $870 | - Total stock-based compensation expense increased by 92% to $1.7 million for the three months ended August 29, 2025, compared to $0.9 million in the prior year[71] Nonvested RSU, PRSU and Restricted Shares Activity | | Shares (in thousands) | Weighted Average Grant Date Fair Value Per Share | | :--- | :--- | :--- | | Unvested, May 30, 2025 | 664 | $16.89 | | Granted | 529 | $15.13 | | Vested | (61) | $14.81 | | Forfeited | (4) | $17.54 | | Unvested, August 29, 2025 | 1,128 | $16.18 | 10. Restructuring Charges This note details restructuring charges incurred during the period. The Company recorded $0.2 million in restructuring charges related to a workforce reduction, in addition to a previously initiated plan to consolidate facilities - The Company recorded $0.2 million in restructuring charges for the three months ended August 29, 2025, primarily due to employee termination benefits from a workforce reduction[75] - No additional charges were incurred related to the previously initiated facility consolidation plan, and the related liability remained at $0.2 million[74] - There were no restructuring charges during the three months ended August 30, 2024[76] 11. Employee Retention Credit This note explains the Employee Retention Credit (ERC) refund received by the Company. The Company received a $1.3 million ERC refund, which was recognized as other income, net of a $0.3 million service fee - The Company received an Employee Retention Credit (ERC) refund of approximately $1.3 million during the three months ended August 29, 2025[77] - A $0.3 million service fee was incurred in connection with filing the ERC claims, resulting in a net positive impact on other income[78] 12. Net Income (Loss) Per Share This note provides the computation of basic and diluted net income (loss) per share. Both basic and diluted EPS shifted to a loss of $0.07 per share for the current period, compared to a gain of $0.02 per share in the prior year Net Income (Loss) Per Share Computation | (In thousands, except per share data) | Three Months Ended August 29, 2025 | Three Months Ended August 30, 2024 | | :--- | :--- | :--- | | Net income (loss) | $(2,084) | $660 | | Basic weighted average shares outstanding | 29,923 | 29,107 | | Diluted weighted average shares outstanding | 29,923 | 29,632 | | Net income (loss) per share - Basic | $(0.07) | $0.02 | | Net income (loss) per share - Diluted | $(0.07) | $0.02 | - Antidilutive employee share-based awards excluded from diluted EPS calculation increased from 640,000 to 1,924,000 shares[80] 13. Segment and Concentration Information This note clarifies that the Company operates in one operating segment, as the chief operating decision maker reviews financial information on a consolidated basis. It also provides a breakdown of property and equipment by geographic area - The Company considers itself to be in one operating segment, as the chief executive officer reviews discrete financial information on a consolidated basis[82] Property and Equipment, Net by Geographic Area | (In thousands) | August 29, 2025 | May 30, 2025 | | :--- | :--- | :--- | | United States | $8,939 | $8,892 | | International | $62 | $77 | | Total property and equipment, net | $9,001 | $8,969 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and results of operations, highlighting key business trends, financial performance, and liquidity Overview This overview introduces Aehr Test Systems as a leading provider of semiconductor test solutions, driven by generative AI and vehicle electrification demand - Aehr Test Systems is a leading provider of test solutions for semiconductor devices, addressing the growing demand driven by generative AI and the electrification of transportation and global infrastructure[86] - The Company's product portfolio includes FOX-P systems (FOX-XP, FOX-NP, FOX-CP), WaferPak contactors, DiePak carriers, and packaged parts burn-in solutions (Sonoma, Tahoe, Echo series) acquired through Incal Technology, Inc[87][88] - The Sonoma line is designed for ultra-high-power burn-in testing of AI accelerators, GPUs, and HPC processors, while Tahoe and Echo target medium- and low-power logic and SoC devices[88] Critical Accounting Estimates This section confirms no material changes to the Company's critical accounting policies and estimates during the reported period - There have been no material changes to the Company's critical accounting policies and estimates during the three months ended August 29, 2025[92] Results of Operations This section analyzes the Company's financial performance, detailing changes in revenue, gross profit, operating expenses, and net income year-over-year Revenue Performance (YoY) | (Dollars in thousands) | August 29, 2025 | August 30, 2024 | Percent Change | | :--- | :--- | :--- | :--- | | Revenues | $10,969 | $13,119 | (16%) | - Revenue decreased by $2.2 million (16%) year-over-year, primarily due to lower contactor shipments ($9.5 million decrease) partially offset by increased systems revenue ($6.7 million increase) and service revenue ($0.6 million increase)[93] Gross Margin Performance (YoY) | (Dollars in thousands) | August 29, 2025 | August 30, 2024 | Percent Change | | :--- | :--- | :--- | :--- | | Gross profit | $3,719 | $7,078 | (47%) | | Gross margin | 33.9% | 54.0% | (20.1 percentage points) | - Gross margin decreased by 20.1 percentage points due to changes in product mix, higher assembly and warranty costs, increased tariffs, and amortization of acquired intangible assets[96] Operating Expenses (YoY) | (Dollars in thousands) | August 29, 2025 | August 30, 2024 | Percent Change | | :--- | :--- | :--- | :--- | | Research and development | $2,849 | $2,361 | 21% | | Selling, general and administrative | $4,717 | $4,558 | 3% | | Restructuring Charges | $219 | - | N.M. | - R&D expenses increased by $0.5 million (21%) due to higher employment-related costs and headcount[98][99] - SG&A expenses remained consistent, with higher stock-based compensation offset by lower legal fees[99] Interest and Other Income (Expense), Net (YoY) | (Dollars in thousands) | August 29, 2025 | August 30, 2024 | Percent Change | | :--- | :--- | :--- | :--- | | Interest income, net | $179 | $681 | (74%) | | Other Income (expense), net | $1,051 | $(26) | N.M. | | Interest and other income (expense), net | $1,230 | $655 | 88% | - Other income (expense), net, increased by $1.1 million, primarily due to a $1.3 million Employee Retention Credit (ERC) refund, net of a $0.3 million service fee[104] Income Tax Expense (Benefit) (YoY) | (Dollars in thousands) | August 29, 2025 | August 30, 2024 | Percent Change | | :--- | :--- | :--- | :--- | | Income tax expense (benefit) | $(752) | $154 | (588%) | - The Company recognized an income tax benefit of $0.8 million, driven by year-to-date losses in the United States, a significant change from the prior year's tax expense[106] Liquidity and Capital Resources This section assesses the Company's ability to meet its financial obligations, reviewing cash flows, cash position, and future capital requirements - Cash, cash equivalents, and restricted cash decreased to $24.7 million as of August 29, 2025, from $40.8 million in the prior year[107] - Management believes existing cash resources and anticipated funds from operations will satisfy cash requirements for the next twelve months[107] Cash Flow Summary (YoY) | (In thousands) | August 29, 2025 | August 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Operating activities | $(282) | $2,380 | $(2,662) | | Investing activities | $(1,391) | $(10,812) | $9,421 | | Financing activities | $(158) | $(106) | $(52) | | Net increase (decrease) in cash | $(1,822) | $(8,529) | $6,707 | - The $2.7 million decrease in cash from operating activities was driven by lower income, decreased deferred revenue, increased accounts payable payments, and lower accounts receivable collection, partially offset by reduced inventory purchases[109] - Net cash used in investing activities decreased by $9.4 million, primarily due to the absence of the $10.6 million Incal acquisition payment made in the prior year, partially offset by increased spending on property and equipment[110] Off-Balance Sheet Agreements This section confirms the absence of any off-balance sheet arrangements, special purpose entities, or undisclosed borrowings or debt - The Company does not have any off-balance sheet arrangements, investments in special purpose entities, or undisclosed borrowings or debt[112] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Aehr Test Systems is not required to provide quantitative and qualitative disclosures about market risk - The Company is not required to provide disclosures about market risk as it is a smaller reporting company[113] Item 4. Controls and Procedures This section confirms the effectiveness of the Company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of August 29, 2025[115] - There were no material changes in the Company's internal control over financial reporting during the three months ended August 29, 2025[116] PART II OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and other disclosures Item 1. Legal Proceedings This item refers to Note 6 for details on legal proceedings, which include the voluntary dismissal of a shareholder class action and derivative lawsuits, and ongoing intellectual property litigation in China - Information regarding legal proceedings is provided in Note 6 – Commitments and Contingencies[117] Item 1A. Risk Factors This item states that there have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended May 30, 2025 - No material changes to risk factors have occurred since the Annual Report on Form 10-K for the year ended May 30, 2025[118] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item reports that there were no unregistered sales of equity securities or use of proceeds during the period - None[119] Item 3. Defaults Upon Senior Securities This item indicates that there were no defaults upon senior securities during the period - None[120] Item 4. Mine Safety Disclosures This item is not applicable to the Company - Not Applicable[121] Item 5. Other Information This item discloses that the President and CEO, Gayn Erickson, terminated his Rule 10b5-1 trading arrangement, and no directors or officers have such arrangements in place as of August 29, 2025 - President and CEO Gayn Erickson terminated his Rule 10b5-1 trading arrangement on August 8, 2025[122] - As of August 29, 2025, none of the Company's directors or officers have a Rule 10b5-1 trading arrangement[122] Item 6. Exhibits This item lists the exhibits filed with the Form 10-Q, including certifications, XBRL documents, and documents incorporated by reference Key Exhibits Filed | Exhibit Number | Description | | :--- | :--- | | 31.1 | Certification of the principal executive officer | | 31.2 | Certification of the principal financial and accounting officer | | 32.1 | Certification pursuant to 18 U.S.C. Section 1350 | | 32.2 | Certification pursuant to 18 U.S.C. Section 1350 | | 101.INS | XBRL Instance Document | SIGNATURES This section contains the official signatures of the Company's principal executive and financial officers, certifying the report's accuracy - The report was signed on October 8, 2025, by Gayn Erickson, President and Chief Executive Officer, and Chris P. Siu, Executive Vice President of Finance and Chief Financial Officer[128][129]