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What changed in AEHR TEST SYSTEMS's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of AEHR TEST SYSTEMS's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+212 added−222 removedSource: 10-K (2024-07-30) vs 10-K (2023-08-28)

Top changes in AEHR TEST SYSTEMS's 2024 10-K

212 paragraphs added · 222 removed · 128 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

61 edited+9 added−3 removed57 unchanged
Biggest changeFULL WAFER CONTACT SYSTEMS Aehr’s FOX-XP test and burn-in platform allows for one of the key reliability screening tests to be completed on an entire wafer full of devices, testing all of them at one time, while also testing and monitoring every device for failures during the burn-in process to provide critical information on those devices.
Biggest changeImplementing this approach along with our proprietary full wafer contactors and device interface carriers provides our customers with the ability to configure a system for engineering characterization and reliability qualification and high-volume production applications. 5 Table of Contents Full Wafer Contact Systems Aehr’s FOX-XP test and burn-in platform allows for reliability screening tests to be completed on an entire wafer full of devices, testing all of them at once or multiple touchdowns, while also testing and monitoring every device for failures during the burn-in process to provide critical information on those devices.
Such fluctuations may result in changes in utilization of the Company’s facilities and resources. The loss of or reduction or delay in orders from a significant customer or a delay in collecting or failure to collect accounts receivable from a significant customer could materially and adversely affect the Company’s business, financial condition and operating results.
Such fluctuations may result in changes in the utilization of the Company’s facilities and resources. The loss of or reduction or delay in orders from a significant customer or a delay in collecting or failure to collect accounts receivable from a significant customer could materially and adversely affect the Company’s business, financial condition and operating results.
MARKETING, SALES AND CUSTOMER SUPPORT The Company has sales and service operations in the United States, Germany, Philippines and Taiwan, dedicated service resources in China and South Korea, and has established a network of distributors and sales representatives in certain key parts of the world.
MARKETING, SALES AND CUSTOMER SUPPORT The Company has sales and service operations in the United States, Germany, the Philippines and Taiwan, dedicated sales and service resources in China and South Korea, and has established a network of distributors and sales representatives in certain key parts of the world.
The Company is developing enhancements to our packaged parts and wafer level burn-in products, intended to improve the capability and performance for testing and burn-in of future generation devices and provide the flexibility in a wide variety of applications.
The Company is developing enhancements to wafer level burn-in products and our packaged parts, intended to improve the capability and performance for testing and burn-in of future generation devices and provide the flexibility in a wide variety of applications.
All employees and Board members sign a Code of Conduct and Ethics policy, and Insider Trading Policy upon hire. All employees are provided with the employee handbook which addresses sexual harassment, confidentiality, and Electronic Use Policy among others. Each of Company’s directors and officers completes a Director and Officer Questionnaire to identify conflicts of interest or areas of concern.
All employees and Board members sign a Code of Conduct and Ethics Policy, and Insider Trading Policy upon hire. All employees are provided with the employee handbook which addresses Sexual Harassment, Confidentiality, and Electronic Use Policy among others. Each of the Company’s directors and officers completes a Director and Officer Questionnaire to identify conflicts of interest or areas of concern.
The upcoming application of silicon photonics integrated circuits for use in optical chip-to-chip communication in addition to the current photonics as multiple companies have made announcements regarding their product roadmaps for co-packaged photonics integrated circuits with microprocessors, graphics processors, chip sets for computing as well as artificial intelligence applications.
The application of silicon photonics integrated circuits for use in optical chip-to-chip communication in addition to the current photonics as multiple companies have made announcements regarding their product roadmaps for co-packaged photonics integrated circuits with microprocessors, graphics processors, chip sets for computing as well as artificial intelligence applications.
For example, this cycling process screens silicon carbide semiconductor devices used in electric vehicle engine controller inverters and their corresponding on-board battery chargers for failure to meet current carrying, power loss and leakage specifications, as well as endurance requirements.
For example, this cycling process screens silicon carbide semiconductor devices used in electric vehicle engine controller inverters and their corresponding on-board battery chargers for failure to meet current power loss and leakage specifications, as well as endurance requirements.
The Company sees the rising tide of the increasing number of embedded sensors and electrical and optical systems in vehicles as a key driver of the increasing market need for more and more reliable semiconductors.
The Company sees the rising tide of the increasing number of embedded sensors and electrical and optical systems in vehicles as a key driver of the increasing market need for reliable semiconductors.
MARKETS The Company’s semiconductor test and reliability qualification solutions address multiple test and burn-in markets including Silicon Carbide (SiC) and Gallium Nitride (GaN) devices for power semiconductors, electric vehicles, electric vehicle charging infrastructure, solar and wind power, silicon photonics for data center infrastructure and worldwide 5G infrastructure, 2D/3D sensors for consumer electronics and automotive applications, and the data storage and memory markets.
MARKETS The Company’s semiconductor test and reliability qualification solutions address multiple test and burn-in markets including Silicon Carbide (SiC) and Gallium Nitride (GaN) devices for power semiconductors, electric vehicles, electric vehicle charging infrastructure, solar and wind power, silicon photonics for data center infrastructure and worldwide 5G infrastructure, 2D/3D sensors for consumer electronics and automotive applications, the data storage and memory and artificial intelligence markets.
See “REVENUE RECOGNITION” in Item 7 under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a further discussion of the Company’s relationship with distributors, and its effects on revenue recognition. The Company’s customer service and support program includes system installation, system repair, applications engineering support, spare parts inventories, customer training and documentation.
See “Revenue Recognition” in Item 7 under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a further discussion of the Company’s relationship with distributors, and its effects on revenue recognition. 7 Table of Contents The Company’s customer service and support program includes system installation, system repair, applications engineering support, spare parts inventories, customer training and documentation.
The first set of tests is typically performed by semiconductor device manufacturers before the processed semiconductor wafer is cut into individual die, in order to avoid the cost of packaging defective die into their packages. This “wafer probe” testing can be performed on one or many die at a time, including testing the entire wafer at once.
The first set of tests is typically performed by semiconductor device manufacturers before the processed semiconductor wafer is cut into individual die, in order to avoid the cost of packaging defective die. This “wafer probe” testing can be performed on one or many die at a time, including testing the entire wafer at once.
The Company has applications engineering and field service personnel located near and sometimes co-located at our customers and includes resources at the corporate headquarters in Fremont, California, at customer locations in Texas, at the Company’s subsidiaries in Germany and the Philippines, at its branch office in Taiwan, and also through third-party agreements in China and South Korea.
The Company has applications engineering and field service personnel located near and sometimes co-located at our customers and includes resources at the corporate headquarters in Fremont, California, at customer locations in Texas, at the Company’s subsidiaries in Germany and the Philippines, at its branch office in Taiwan, and also through third-party agreements in China.
The Company’s success is in part dependent on its ability to attract and retain highly skilled workers, who are in high demand. None of the Company’s employees are represented by a union and the Company has never experienced a work stoppage. The Company’s management considers its relations with its employees to be good.
The Company’s success is in part dependent on its ability to attract and retain highly skilled workers, who are in high demand. None of the Company’s employees are represented by a union and the Company has never experienced a work stoppage due to strike. The Company’s management considers its relations with its employees to be good.
The gallium nitride market appears to be a potentially significant growth driver for our systems and WaferPak full wafer Contactors, particularly for automotive and photovoltaic applications where burn-in appears to be critical for meeting the initial quality and reliability needs of those markets.
The gallium nitride market appears to be a potentially significant growth driver for our systems and WaferPak full wafer contactors, particularly for automotive, photovoltaic and other industrial applications where burn-in appears to be critical for meeting the initial quality and reliability needs of those markets.
Due to the possibility of customer changes in delivery schedules or cancellations and potential delays in product shipments or development projects, the Company’s backlog as of a particular date may not be indicative of net sales for any succeeding period.
Due to the possibility of customer changes in delivery schedules or cancellations and potential delays in product shipments or development projects, the Company’s backlog as of a particular date may not be indicative of net revenues for any succeeding period.
Selected financial information, including net sales and property and equipment, net for each of the last three fiscal years, by geographic area is included in Part II, Item 8, Note 2, “Revenue” and Note 17, “Segment Information” and certain risks related to such operations are discussed in Part I, Item 1A, Risk Factors, under the heading “We sell our products and services worldwide, and our business is subject to risks inherent in conducting business activities in geographic regions outside of the United States.” AVAILABLE INFORMATION The Company’s common stock trades on the NASDAQ Capital Market under the symbol “AEHR.” The Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports that are filed with the United States Securities and Exchange Commission, or SEC, pursuant to Section 13(a) or 15(d) of the Exchange Act, are available free of charge through the Company’s website at www.aehr.com as soon as reasonably practicable after we electronically file them with, or furnish them to the SEC.
Selected financial information, including net revenues and property and equipment, net for each of the last three fiscal years, by geographic area is included in Part II, Item 8, Note 12, “Revenue” and Note 15, “Segment Information” and certain risks related to such operations are discussed in Part I, Item 1A, Risk Factors, under the heading “We sell our products and services worldwide, and our business is subject to risks inherent in conducting business activities in geographic regions outside of the United States.” 10 Table of Contents AVAILABLE INFORMATION The Company’s common stock trades on the NASDAQ Capital Market under the symbol “AEHR.” The Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports that are filed with the United States Securities and Exchange Commission, or SEC, pursuant to Section 13(a) or 15(d) of the Exchange Act, are available free of charge through the Company’s website at www.aehr.com as soon as reasonably practicable after we electronically file them with, or furnish them to the SEC.
The Company regularly evaluates its ability to attract and retain its employees. The Company has had relatively low turnover rates within its workforce, with 58% of its regular full-time workforce being with the Company for 5 years or more.
The Company regularly evaluates its ability to attract and retain its employees. The Company has had relatively low turnover rates within its workforce, with 51% of its regular full-time workforce being with the Company for 5 years or more.
Using Known-Good Die, or KGD, which are fully burned-in and tested die, in multi-chip/heterogeneous packages helps assure the reliability of the final product and lowers costs by increasing the yield of high-cost multi-chip packages. Wafer-level burn-in and test enables lower cost production of KGD for multi-chip modules, 3-D stacked packages and systems-in-a-package.
Using Known-Good Die, or KGD, which are fully burned-in and tested die, in multi-chip/heterogeneous packages assures the reliability of the final product and lowers costs by increasing the yield of high-cost multi-chip packages. Wafer-level burn-in and test enables lower cost production of KGD for multi-chip modules, 3-D stacked packages and systems-in-a-package.
The Company improved our facility by replacing existing air conditioners and heat exchanger: with higher efficiency units that draw less power and produce less wasted energy. Our new headquarters facility upgrades include moving to high efficiency lighting, modernizing our electrical power and cooling infrastructure, and adding Electric Vehicle charging stations for employees, vendors, and customers.
The Company improved its facilities by replacing existing air conditioners and heat exchanger with higher efficiency units that draw less power and produce less wasted energy. Our headquarters facility upgrades include moving to high efficiency lighting, modernizing our electrical power and cooling infrastructure, and adding Electric Vehicle charging stations for employees, vendors, and customers.
Item 1. Business THE COMPANY Aehr Test Systems, Inc. (“Aehr Test,” “Aehr,” or “we”) was incorporated in the state of California on May 25, 1977 and is headquartered in Fremont, California.
Item 1. Business OVERVIEW Aehr Test Systems, Inc. (“Aehr Test,” “Aehr,” or “we”) was incorporated in the state of California on May 25, 1977 and is headquartered in Fremont, California.
No other customers accounted for more than 10% of the Company’s net sales for any of these periods. The Company expects that sales of its products to a limited number of customers will continue to account for a high percentage of net sales for the foreseeable future. In addition, sales to particular customers may fluctuate significantly from quarter to quarter.
No other customers accounted for more than 10% of the Company’s net revenues for any of these periods. The Company expects that sales of its products to a limited number of customers will continue to account for a high percentage of net revenues for the foreseeable future. In addition, revenues from significant customers may fluctuate significantly from quarter to quarter.
There can be no assurance that the Company will be able to compete successfully in the future. PROPRIETARY RIGHTS The Company relies primarily on the technical and creative ability of its personnel, its proprietary software, and trade secrets and copyright protection, rather than on patents, to maintain its competitive position.
There can be no assurance that the Company will be able to compete successfully in the future. 8 Table of Contents PROPRIETARY RIGHTS The Company relies primarily on the technical and creative ability of its personnel, its proprietary software, and trade secrets and copyright protection, rather than on patents, to maintain its competitive position.
SOCIAL The Company reviews hiring and turnover quarterly and performs annual salary reviews, using independent third-party data, to ensure competitive compensation practices. The Company performs annual employee surveys to evaluate employee satisfaction. Glassdoor shows the Company at a 4.1 out of 5 rating as a great place to work.
Social The Company reviews hiring and turnover quarterly and performs annual salary reviews, using independent third-party data, to ensure competitive compensation practices. The Company conducts annual employee surveys to evaluate employee satisfaction. Glassdoor shows the Company at a 4.2 out of 5 rating as a great place to work.
The FOX-XP and FOX-NP systems are full wafer contact and singulated die/module test and burn-in systems that can test, burn-in, and stabilize a wide range of devices such as leading-edge silicon carbide-based and other power semiconductors, 2D and 3D sensors used in mobile phones, tablets, and other computing devices, memory semiconductors, processors, microcontrollers, systems-on-a-chip, and photonics and integrated optical devices.
The FOX-XP and FOX-NP systems are full wafer contact and singulated die/module test and burn-in systems that can test, burn-in, and stabilize a wide range of devices such as leading-edge silicon carbide-based and gallium nitride power semiconductors, 2D and 3D sensors used in mobile phones, tablets, and other computing devices, memory semiconductors, processors, microcontrollers, systems-on-a-chip, and photonics and integrated optical devices used in artificial intelligence.
Supporting a wide range of wafer sizes (e.g. 100/200/300mm) allows a broad range of customers to implement fully automated wafer level test and burn-in factories. Similar to the WaferPak Aligner for WaferPak Contactors, the Company offers the DiePak Loader for DiePak Carriers.
Supporting a wide range of wafer sizes (e.g. 100/200/300mm) allows a broad range of customers to implement fully automated wafer level test and burn-in factories. 6 Table of Contents Similar to the WaferPak Aligner for WaferPak Contactors, the Company offers the DiePak Loader for DiePak Carriers.
The FOX-CP reduces test cost by functionally testing wafers during reliability screening to identify failing logic, memory, power or photonic die before the die are integrated into 5 Table of Contents their final package, and is optimal for test times ranging from minutes to a few hours or where multiple touchdowns are required to test the entire wafer.
The FOX-CP reduces test cost by functionally testing wafers during reliability screening to identify failing logic, memory, power or photonic die before the die are integrated into their final package, and is optimal for test times ranging from minutes to a few hours or where multiple touchdowns are required to test the entire wafer.
Such claims could include assertions that the Company’s products infringe, or may infringe, the proprietary rights of third parties, requests for indemnification against 8 Table of Contents such infringement or suggest the Company may be interested in acquiring a license from such third parties.
Such claims could include assertions that the Company’s products infringe, or may infringe, the proprietary rights of third parties, requests for indemnification against such infringement or suggest the Company may be interested in acquiring a license from such third parties.
In addition, the Company from time to time employs a number of contractors, temporary, and part-time employees, particularly to perform customer support and manufacturing. The Company’s employees are dispersed across principal offices in the United States, Germany, Taiwan, and Philippines.
In addition, the Company from time to time employs a few contractors, temporary, and part-time employees, particularly to perform customer support and manufacturing. The Company’s employees are dispersed across principal offices in the United States, Germany, Taiwan, and the Philippines.
This can either be done at the wafer level, before the die are packaged, or at the package level, after the die are packaged. The burn-in process screens for early failures by operating the device at elevated voltages and 3 Table of Contents temperatures, at up to 150 degrees Celsius (302 degrees Fahrenheit) or higher.
This can either be done at the wafer level, before the die are packaged, or at the package level, after the die are packaged. The burn-in process screens for early failures by operating the device at elevated voltages and temperatures, at up to 150 degrees Celsius (302 degrees Fahrenheit) or higher.
As sensors become more pervasive and add critical new functionality to devices, it becomes more and more important that the data collected be accurate and 4 Table of Contents reliable, which we believe will drive more and more requirements for our solutions for production test and burn-in of these sensors.
As sensors become more pervasive and add critical new functionality to devices, it becomes increasingly important that the data collected be accurate and reliable, which we believe will drive requirements for our solutions for production test and burn-in of these sensors.
The FOX-NP system is 100% compatible with the FOX-XP system and is configurable with up to two slot assemblies per system compared to up to 18 slot assemblies in the FOX-XP system. The FOX-CP was introduced in February 2019 and is a low-cost single-wafer compact test and reliability verification solution for logic, memory, power and photonic devices.
The FOX-NP system is 100% compatible with the FOX-XP system and is configurable with up to two slot assemblies per system compared to up to 18 slot assemblies in the FOX-XP system. The FOX-CP is a low-cost single-wafer compact test and reliability verification solution for logic, memory, power and photonic devices.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) ENVIRONMENTAL The Company focuses on clean technology such as the electrical vehicle (“EV”) and power semiconductors market. EV and power semiconductor revenues accounted for 85%, 82%, and 23% of total revenues in fiscal 2023, 2022 and 2021, respectively.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) Environmental The Company focuses on clean technology such as the electrical vehicle (“EV”) and power semiconductors market. EV and power semiconductor revenues accounted for 92%, 85%, and 82% of total revenues in fiscal 2024, 2023, and 2022, respectively.
The Company believes that the investments we make in driving a strong, values-based culture and supporting its employees through programs, development, and competitive pay enhances its organizational capability. Company management quarterly reviews retention and turnover, employee communications, performance review status, and compensation and benefits to identify potential issues or opportunities.
The Company believes that the investments we make in driving a strong, values-based culture and supporting its employees through programs, development, and competitive pay enhances its organizational capability. The Company’s management reviews retention and turnover data, employee communications, performance review status, and compensation and benefits to identify potential issues or opportunities for improvement on a quarterly basis.
The Company believes that maintaining a close relationship with customers and providing them with ongoing engineering support improves customer satisfaction and will provide the Company with a competitive advantage in selling its products to the Company’s customers. BACKLOG At May 31, 2023, the Company’s backlog was $24.5 million compared with $11.1 million at May 31, 2022.
The Company believes that maintaining a close relationship with customers and providing them with ongoing engineering support improves customer satisfaction and will provide the Company with a competitive advantage in selling its products to the Company’s customers. BACKLOG At May 31, 2024, the Company’s backlog was $7.3 million compared with $24.5 million at May 31, 2023.
Semiconductor manufacturers rely on testing and reliability screening to identify and eliminate defects that occur during the manufacturing process. Testing and reliability screening involve multiple steps.
Semiconductor manufacturers rely on testing and reliability screening to identify and eliminate defects that occur during the manufacturing process. 3 Table of Contents Testing and reliability screening involve multiple steps.
Net sales of packaged part product lines, systems and services for fiscal 2023, 2022 and 2021 were $1.4 million, $1.9 million, and $1.6 million, respectively, and accounted for approximately 2%, 4% and 10% of the Company’s net sales in fiscal 2023, 2022 and 2021, respectively.
Net revenues of packaged part product lines, systems and services for fiscal 2024, 2023, and 2022 were $1.6 million, $1.4 million, and $1.9 million, respectively, and accounted for approximately 2%, 2%, and 4% of the Company’s net revenues in fiscal 2024, 2023, and 2022, respectively.
CUSTOMERS The Company markets and sells its products throughout the world to semiconductor manufacturers, semiconductor contract assemblers, electronics manufacturers and burn-in and test service companies. Sales to the Company’s five largest customers accounted for approximately 97%, 98%, and 84% of its net sales in fiscal 2023, 2022 and 2021, respectively.
CUSTOMERS The Company markets and sells its products throughout the world to semiconductor manufacturers, semiconductor contract assemblers, electronics manufacturers and burn-in and test service companies. Revenues from the Company’s five largest customers accounted for approximately 93%, 97%, and 98% of its net revenues in fiscal 2024, 2023, and 2022, respectively.
There are currently no pending claims against the Company regarding infringement of any patents or other intellectual property rights of others. However, the Company may, from time to time, receive communications from third parties asserting intellectual property claims against the Company.
As of May 31, 2024, there were no pending claims against the Company regarding infringement of any patents or other intellectual property rights of others. However, the Company may, from time to time, receive communications from third parties asserting intellectual property claims against the Company.
The ABTS system can test and burn-in both high-power logic and low-power ICs. It can be configured to provide individual device temperature control for devices up to 70W or more and with up to 320 I/O channels. The ABTS system is nearing the end of its lifecycle and limited shipments are expected in the future.
It can be configured to provide individual device temperature control for devices up to 70W or more and with up to 320 I/O channels. The ABTS system is nearing the end of its lifecycle and limited shipments are expected in the future.
The Company also provides a 401k plan, and a non-contributory Employee Stock Ownership plan, for U.S. employees. The Company provides recurring training in compliance with State of California ragulations including sexual harassment, prevention of violence in the workplace, and Diversity, Equality, and Inclusion (“DEI”) training.
The Company also provides a 401(k) plan, and a non-contributory Employee Stock Ownership plan, for U.S. employees. 9 Table of Contents The Company provides recurring training in compliance with State of California regulations including sexual harassment, prevention of violence in the workplace, and Diversity, Equality, and Inclusion (“DEI”) training.
These devices reduce power loss by as much as greater than 75% over power silicon alternatives like IGBT (Insulated-Gate Bipolar Transistor) devices, which has essentially changed the entire market dynamic. With this development, the Company sees most, if not every automotive company that is working on electric vehicles, moving to silicon carbide-based powertrain and charging systems in the near future.
These devices reduce power loss by as much as greater than 75% over power silicon alternatives like IGBT (Insulated-Gate Bipolar Transistor) devices, which has essentially changed the entire market dynamic. With the power efficiency advantages of SiC, the Company sees most, if not every electric vehicle automotive company moving to silicon carbide-based powertrain and charging systems in the near future.
In addition, our service and support organization has employees located worldwide, at or near customer facilities, to provide timely customer response. As of May 31, 2023 regular full-time employees were located in the following geographic areas: 80 United States, 1 Germany, 5 Taiwan, and 18 in the Philippines.
In addition, our service and support organization has employees located worldwide, at or near customer facilities, to provide timely customer response. As of May 31, 2024 regular full-time employees were located in the following geographic areas: 83 in United States, 25 in the Philippines, five in Taiwan and two in Germany.
This capability was introduced in March 2017. The FOX-NP was introduced in January 2019 and is a low-cost entry-level system to provide a configuration and price point for companies to initiate a new product introduction and production qualification, enabling an easier transition to the FOX-XP system for high volume production test.
The FOX-NP is a low-cost entry-level system to provide a configuration and price point for companies to initiate a new product introduction and production qualification, enabling an easier transition to the FOX-XP system for high volume production test.
The Company ensures compliance with International Organization for Standardization (ISO”) certification and maintains safety training. GOVERNANCE The Company’s Board satisfies the diversity objectives of Nasdaq Rule 5605(1)(2) for Smaller Reporting Companies with two directors who identify as female, representing 33% of the total six Board members. The Board members also include individuals with Native American origin and multi-ethnicity.
Governance The Company’s Board satisfies the diversity objectives of Nasdaq Rule 5605(1)(2) for Smaller Reporting Companies with two directors who identify as female, representing 33% of the total six Board members. The Board members also include individuals with Native American origin and multi-ethnicity.
This is an enormously valuable capability, as it allows its customers to screen devices that would otherwise fail after they are packaged into multi-die modules where the yield impact is 10 times or even 100 times as costly.
This is an enormously valuable capability, as it screens out devices that would otherwise fail after they are packaged into multi-die modules where the yield impact could be 10 times or even 100 times as costly.
Net sales of full wafer contact product lines, systems, WaferPak Contactors, DiePaks Carriers and services for fiscal 2023, 2022 and 2021 were $63.5 million, $48.9 million, and $15.0 million, respectively, and accounted for approximately 98%, 96% and 90% of the Company’s net sales in fiscal 2023, 2022 and 2021, respectively.
Net revenues of full wafer contact product lines, systems, WaferPak Contactors, DiePak Carriers and services for fiscal 2024, 2023, and 2022 were $64.6 million, $63.5 million, and $48.9 million, respectively, and accounted for approximately 98%, 98%, and 96% of the Company’s net revenues in fiscal 2024, 2023, and 2022, respectively.
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.
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. Mission critical applications are driving increased quality, reliability, safety, and security needs of semiconductors.
This, in turn, is increasing the need for 100% production test and burn-in of devices in order to lower the infant mortality rate of devices and ensure that these devices and systems operate over the life of the vehicles.
This, in turn, is increasing the need for 100% production test and burn-in of devices to lower the infant mortality rate of devices and ensure that these devices and systems operate over the life of the vehicles. PRODUCTS The Company manufactures and markets full wafer contact test systems, test during burn-in systems, test fixtures and related accessories.
The Company also maintains Audit, Compensation and Nominating and Governance Committees to provide corporate oversight. 9 Table of Contents HUMAN CAPITAL RESOURCES As of May 31, 2023, the Company, including its foreign subsidiaries and one branch office, employed 104 persons collectively, on a regular full-time basis, of whom 23 were engaged in research, development and related engineering, 31 were engaged in manufacturing, 39 were engaged in marketing, sales and customer support and 11 were engaged in general administration, finance and IT functions.
HUMAN CAPITAL RESOURCES As of May 31, 2024, the Company, including its foreign subsidiaries and one branch office, employed 115 persons collectively, on a regular full-time basis, of whom 28 were engaged in research, development and related engineering, 39 were engaged in manufacturing, 33 were engaged in marketing, sales and customer support and 15 were engaged in general administration, finance and IT functions.
Increasing 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 storage, are driving additional test requirements, incremental capacity needs, and new opportunities for Aehr Test products and solutions.
The applications include electric vehicles, electric vehicle charging infrastructure, solar and wind power, computing, data and telecommunications infrastructure, and solid-state memory storage. The trend is driving additional test requirements, incremental capacity needs, and new opportunities for Aehr Test products and solutions.
The Company’s FOX-P family of products are very cost-effective solutions for ensuring the critical quality and reliability of devices in this market, where performance and reliability can not only mean increased battery life, but also assurance against failure of a vehicle whose power semiconductor fails in the power train.
The Company’s FOX-P family of products are cost-effective solutions to help ensure the critical quality and reliability of devices in this market, where quality and reliability can provide assurance against failure of a vehicle whose power semiconductor fails in the power drive train.
During fiscal 2023, two customers accounted for approximately 79% and 10% of the Company’s net sales. During fiscal 2022, one customer accounted for approximately 82% of the Company’s net sales. During fiscal 2021, four customers accounted for approximately 24%, 23%, 20% and 10%, respectively, of the Company’s net sales.
During fiscal 2024, two customers accounted for approximately 67% and 17% of the Company’s net revenues. During fiscal 2023, two customers accounted for approximately 79% and 10% of the Company’s net revenues. During fiscal 2022, one customer accounted for approximately 82% of the Company’s net revenues.
The Company’s proprietary software is copyrighted and licensed to the Company’s customers. At May 31, 2023, the Company held 46 issued United States patents with expiration date ranges from 2023 to 2038 and had several additional United States patent applications and foreign patent applications pending.
The Company’s proprietary software is copyrighted and licensed to the Company’s customers. As of May 31, 2024, the Company held more than 110 active patents in the United States, Singapore, China, Japan, Korea, and other countries, with expiration date ranges from 2024 to 2041, and had several additional United States patent applications and foreign patent applications pending.
Several updates to the ABTS system have been made since its introduction, including the ABTS-P system released in 2012. The ABTS family of products is based on a hardware and software architecture that is intended to address not only today’s devices, but also future devices for many years to come.
The ABTS family of products is based on a hardware and software architecture that is intended to address not only today’s devices, but also future devices for many years to come. The ABTS system can test and burn-in both high-power logic and low-power ICs.
Pin electronics at each burn-in board, or BIB, position are designed to provide accurate signals to the ICs being tested and detect whether a device is failing the test.
Pin electronics at each burn-in board (BIB), position are designed to provide accurate signals to the ICs being tested and detect whether a device is failing the test. Devices being tested are placed on BIBs and loaded into environmental chambers which typically operate at temperatures from 25 degrees Celsius (77 degrees Fahrenheit) up to 150 degrees Celsius (302 degrees Fahrenheit).
Mobile 2D and 3D Sensors Sensors used in mobile devices such as smartphones, tablets, wearables such as watches and fitness bands, and audio devices have become pervasive.
These processes work to ensure the reliability and longevity of AI chips, thereby helping to contribute to the overall growth and success of the AI industry. Mobile 2D and 3D Sensors Sensors used in mobile devices such as smartphones, tablets, wearables such as watches and fitness bands, and audio devices have become pervasive.
The Company promotes employee engagement through corporate events or activities and maintains a “First Years” group to encourage new hires to build comradery, and assist in recruiting efforts. The Company provides health care coverage for all RFT employees, life insurance, continuing education assistance, and reimbursement of employee health club membership.
The Company promotes employee engagement through corporate events or activities on a regular basis. The Company provides health care coverage for all RFT employees, life insurance, continuing education assistance, and reimbursement of U.S. employee health club membership. The Company ensures compliance with International Organization for Standardization (“ISO”) certification and maintains safety training.
In the case of silicon photonics, the laser devices are bonded directly to a silicon-based device that has all the logic multiplexing and de-multiplexing, and other high-speed communication subsystems, all integrated into a silicon-based integrated circuit.
In the case of silicon photonics, the laser devices are bonded directly to a silicon-based device that has all the logic multiplexing and de-multiplexing, and other high-speed communication subsystems, all integrated into a silicon-based integrated circuit. 4 Table of Contents Data Storage and Memory The Company also sees new developments in the data storage and memory markets as new opportunities for its systems where these end markets and customers require devices to have extremely high levels of quality and long-term reliability.
RESEARCH AND PRODUCT DEVELOPMENT The Company historically has devoted a significant portion of its financial resources to research and development programs and expects to continue to allocate significant resources to these efforts. Certain research and development expenditures related to non-recurring engineering milestones have been transferred to cost of goods sold, reducing research and development expenses.
RESEARCH AND PRODUCT DEVELOPMENT The Company historically has devoted a significant portion of its financial resources to research and development programs and expects to continue to allocate significant resources to these efforts. The Company’s research and development expenses were $8.7 million, $7.1 million, $5.8 million during fiscal 2024, 2023, and 2022, respectively.
The Company’s research and development expenses during fiscal 2023, 2022 and 2021 were $7.1 million, $5.8 million and $3.7 million, respectively. 7 Table of Contents The Company conducts ongoing research and development to design new products and to support and enhance existing product lines.
The Company conducts ongoing research and development to design new products and to support and enhance existing product lines.
A single BIB can hold up to several hundred ICs, and a production chamber holds up to 72 BIBs, resulting in thousands of memory or logic devices being tested in a single system. 6 Table of Contents The Advanced Burn-in and Test System, or ABTS, was introduced in fiscal 2008.
Using our optional chambers, our systems can produce temperatures as low as -55 degrees Celsius (-67 degrees Fahrenheit). A single BIB can hold up to several hundred integrated circuits (“ICs”), and a production chamber holds up to 72 BIBs, resulting in thousands of memory or logic devices being tested in a single system.
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Data Storage and Memory The Company also sees the data storage and memory markets as critical new opportunities for its systems where these end markets and customers require devices to have extremely high levels of quality and long-term reliability. PRODUCTS The Company manufactures and markets full wafer contact test systems, test during burn-in systems, test fixtures and related accessories.
Added
One of the market opportunities for wafer level burn-in is semiconductors used in Hard Disk drives for data storage. The NAND Flash market implements 100% test and burn-in of devices to be used in mission critical applications such as enterprise storage.
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Devices being tested are placed on BIBs and loaded into environmental chambers which typically operate at temperatures from 25 degrees Celsius (77 degrees Fahrenheit) up to 150 degrees Celsius (302 degrees Fahrenheit). Using our optional chambers, our systems can produce temperatures as low as -55 degrees Celsius (-67 degrees Fahrenheit).
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The Company sees NAND Flash market as an opportunity for our fully automated systems and WaferPaks with long term potential to also move into DRAM wafer level test and burn-in. Artificial intelligence The artificial intelligence (AI) processor market is experiencing a significant surge, driven by the increasing demand for machine learning and AI applications.
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The public may read and copy any materials filed by the Company with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operations of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
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Semiconductor companies are continuously innovating and releasing new AI chips to meet this demand. The production of AI processor wafers has seen substantial growth, with companies shipping millions of devices. As the AI processor market grows, the Company sees the need for burn-in becoming increasingly important.
Added
AI Processors distinct architecture of die-to-die interdependency and increased memory size and use create a unique opportunity for the Company to apply enabling wafer level test and burn-in technology for its customers and potential future customers.
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Subjecting the AI processors under stress to eliminate potential failures before they are deployed is crucial as they are often used in critical applications where failure can have significant consequences. Therefore, as the AI chip market continues to expand, the importance of robust and efficient burn-in processes cannot be overstated.
Added
The Company’s product portfolio is platform-based systems with a modular configurable approach to enable a broad market approach while leveraging refined high-quality modules as building blocks. The platform-based system enables the optimized configuration for the market, application or specific customer requirement.
Added
Modules and configurability provide a range of current and voltage selections over a range of power and thermal capacities while enabling digital control for each unique device requirement.
Added
The Advanced Burn-in and Test System, or ABTS, was introduced in fiscal 2008. Several updates to the ABTS system have been made since its introduction, including the ABTS-P system released in 2012.
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The Company also maintains Audit, Compensation and Nominating and Governance Committees to provide corporate oversight.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we were to lose one or more of our large customers, operating results could suffer dramatically. The semiconductor manufacturing industry is highly concentrated, with a relatively small number of large semiconductor manufacturers and contract assemblers accounting for a substantial portion of the purchases of semiconductor equipment.
Biggest changeRisks Related to our Business and Industry We generate a large portion of our sales from a small number of customers. If we were to lose one or more of our large customers, operating results could suffer dramatically.
Our future success will depend in significant part upon our ability to attract and retain highly skilled technical, management, sales and marketing personnel. There are a limited number of personnel with the requisite skills to serve in these positions, and it has become increasingly difficult for us to hire such personnel.
Our future success will depend in significant part upon our ability to attract, retain and motivating highly skilled technical, management, sales and marketing personnel. There are a limited number of personnel with the requisite skills to serve in these positions, and it has become increasingly difficult for us to hire such personnel.
Competition for such personnel in the semiconductor equipment industry is intense, and there can be no assurance that we will be successful in attracting or retaining such personnel. Changes in management could disrupt our operations and adversely affect our operating results.
Competition for such personnel in the semiconductor equipment industry is intense, and there can be no assurance that we will be successful in attracting, retaining or motivating such personnel. Changes in management could disrupt our operations and adversely affect our operating results.
Because new product development commitments must be made well in advance of sales, new product decisions must anticipate both future demand and the technology that will be available to supply that demand. Furthermore, introductions of new and complex products typically involve a period in which design, engineering and reliability issues are identified and addressed by our suppliers and by us.
Because new product development commitments must be made well in advance of sales, new product decisions must anticipate both future demand and the technology that will be available to satisfy that demand. Furthermore, introductions of new and complex products typically involve a period in which design, engineering and reliability issues are identified and addressed by our suppliers and by us.
We believe that factors such as announcements of developments related to our business, fluctuations in our operating results, general conditions in the semiconductor and semiconductor equipment industries as well as the worldwide economy, announcement of technological innovations, new systems or product enhancements by us or our competitors, fluctuations in the level of cooperative development funding, acquisitions, changes in governmental regulations, developments in patents or other intellectual property rights and changes in our relationships with customers and suppliers could cause the price of our common stock to fluctuate substantially.
Factors such as announcements of developments related to our business, fluctuations in our operating results, general conditions in the semiconductor and semiconductor equipment industries as well as the worldwide economy, announcement of technological innovations, new systems or product enhancements by us or our competitors, fluctuations in the level of cooperative development funding, acquisitions, changes in governmental regulations, developments in patents or other intellectual property rights and changes in our relationships with customers and suppliers could cause the price of our common stock to fluctuate substantially.
Risks Related to our Legal/Organizational Structure We depend on our key personnel and our success depends on our ability to attract and retain talented employees. Our success depends to a significant extent upon the continued service of Gayn Erickson, our President and Chief Executive Officer, as well as other executive officers and key employees.
Risks Related to our Financial/Legal/Organizational Structure We depend on our key personnel and our success depends on our ability to attract, retain and motivate talented employees. Our success depends to a significant extent upon the continued service of Gayn Erickson, our President and Chief Executive Officer, as well as other executive officers and key employees.
Should the Company increase its sales prices to recover the increase in costs, this could result in a decrease in the competitiveness of our products. In addition, we are subject to other risks associated with purchasing materials from suppliers worldwide. Government 13 Table of Contents authorities may also implement protectionist policies or impose limitations on the transfer of intellectual property.
Should the Company increase its sales prices to recover the increase in costs, this could result in a decrease in the competitiveness of our products. In addition, we are subject to other risks associated with purchasing materials from suppliers worldwide. Government authorities may also implement protectionist policies or impose limitations on the transfer of intellectual property.
Customer tool utilization is driven by many factors including failure rates of customer devices. Improvements in yield may result in customers decreasing test and burn-in times, or electing to perform sampling rather than 100% burn-in 12 Table of Contents of their devices. Based upon data obtained from our systems customers may revise internal manufacturing processes to decrease failure rates.
Customer tool utilization is driven by many factors including failure rates of customer devices. Improvements in yield may result in customers decreasing test and burn-in times, or electing to perform sampling rather than 100% burn-in of their devices. Based upon data obtained from our systems customers may revise internal manufacturing processes to decrease failure rates.
Our net sales for fiscal 2023 were primarily denominated in U.S. Dollars. However, because a substantial portion of our net sales is from sales of products for delivery outside the United States, an increase in the value of the U.S.
Our net sales for fiscal 2024 were primarily denominated in U.S. Dollars. However, because a substantial portion of our net sales is from sales of products for delivery outside the United States, an increase in the value of the U.S.
Market acceptance of the FOX system is subject to a number of risks. Before a customer will incorporate the FOX system into a production line, lengthy qualification and correlation tests must be performed. We anticipate that potential customers may be reluctant to change their procedures in order to transfer burn-in and test functions to the FOX system.
Market acceptance of the FOX system is subject to a number of risks. Before a customer incorporates the FOX system into a production line, lengthy qualification and correlation tests must be performed. We anticipate that potential customers may be reluctant to change their procedures in order to transfer burn-in and test functions to the FOX system.
The recent decline in relations between the United States and China, and relations between China and Taiwan, may result in the imposition of trade restrictions with China or Taiwan.
The on-going decline in relations between the United States and China, and relations between China and Taiwan, may result in the imposition of trade restrictions with China or Taiwan.
Approximately 86%, 90%, and 68% of our net sales in fiscal 2023, 2022 and 2021, respectively, were attributable to sales to customers for delivery outside of the United States.
Approximately 95%, 86%, and 90% of our net sales in fiscal 2024, 2023, and 2022, respectively, were attributable to sales to customers for delivery outside of the United States.
Manufacturing issues or capacity problems experienced by our suppliers or contract manufacturers could impact our ability to secure sufficient supply of critical components. Due to the market shortage of semiconductor supply, suppliers and contract manufacturers may commit their capacity to others, limiting our supplies or increasing costs.
Manufacturing issues or capacity problems experienced by our suppliers or contract manufacturers could impact our ability to secure sufficient supply of critical components. If there is a market shortage of semiconductor supply, suppliers and contract manufacturers may commit their capacity to others, limiting our supplies or increasing costs.
In addition, in recent years the stock market in general, and the market for small capitalization and high technology stocks in particular, have experienced extreme price fluctuations which have often been unrelated to the operating performance of the affected companies. Such fluctuations could adversely affect the market price of our common stock.
In addition, in recent years the stock market in general, and the market for small capitalization and high technology stocks in particular, have experienced extreme price fluctuations which have often been unrelated to the operating performance of the affected companies.
Our sales growth depends on our ability to obtain timely deliveries of parts from our suppliers and contract manufacturers. There is currently a market shortage of semiconductor and other component supply which has affected, and could further affect, lead times, the cost of supply, and our ability to meet customer demand for our products.
Our sales growth depends on our ability to obtain timely deliveries of parts from our suppliers and contract manufacturers. A market shortage of semiconductor and other component supply could affect lead times, the cost of supply, and our ability to meet customer demand for our products.
A delay or reduction in shipments near the end of a particular quarter, due, for example, to unanticipated shipment rescheduling, cancellations or deferrals by customers, customer credit issues, unexpected manufacturing difficulties experienced by us or delays in deliveries by suppliers, could cause net sales in a particular quarter to fall significantly.
A delay or reduction in shipments near the end of a particular quarter, due, for example, to unanticipated shipment rescheduling, cancellations or deferrals by customers, customer credit issues, unexpected manufacturing difficulties experienced by us or delays in deliveries by suppliers, could cause net sales in a particular quarter to fall significantly. 11 Table of Contents The semiconductor equipment industry is intensely competitive.
A decrease in customer tool utilization may result in a decrease in demand for our products impacting our business and results of operations. Future changes in semiconductor technologies may make our products obsolete. Future improvements in semiconductor design and manufacturing technology may reduce or eliminate the need for our products.
A decrease in customer quality targets or tool utilization may result in a decrease in demand for our products impacting our business and results of operations. Future improvements in semiconductor design and manufacturing technology may also reduce or eliminate the need for our products.
If any of the following risks occur, our business, financial condition or results of operations could be materially and adversely affected which could cause our actual operating results to differ materially from those indicated or suggested by forward-looking statements made in this Annual Report on Form 10-K or presented elsewhere by management from time to time. 10 Table of Contents Risks Related to our Business and Industry We generate a large portion of our sales from a small number of customers.
If any of the following risks occur, our business, financial condition or results of operations could be materially and adversely affected which could cause our actual operating results to differ materially from those indicated or suggested by forward-looking statements made in this Annual Report on Form 10-K or presented elsewhere by management from time to time.
We expect that sales of our products to a limited number of customers will continue to account for a high percentage of our net sales for the foreseeable future. In addition, sales to particular customers may fluctuate significantly from quarter to quarter.
No other customers accounted for more than 10% of our net sales for any of these periods. We expect that sales of our products to a limited number of customers will continue to account for a high percentage of our net sales for the foreseeable future. In addition, sales to particular customers may fluctuate significantly from quarter to quarter.
Global economic uncertainty and financial market volatility caused by political instability, changes in international trade relationships and conflicts, such as the conflict between Russia and Ukraine and the political climate in China and Taiwan may result in limited access to these markets for sales and material purchases.
Global economic uncertainty and financial market volatility caused by political instability, changes in international trade relationships and conflicts, such as the conflict between Russia and Ukraine and the political climate in China and Taiwan, the Israel-Hamas war, and escalating tensions in the Red Sea in connection with the attacks to disrupt shipments may result in limited access to these markets for sales and material purchases.
The Company is exposed to cybersecurity threats or incidents. We collect, maintain, and transmit data on information systems. These systems include those owned and maintained by the Company or by third parties. In addition, we use cloud-based enterprise resource planning, ERP, software to manage the business integrating all facets of operations, including manufacturing, finance, and sales and marketing.
These systems include those owned and maintained by the Company or by third parties. In addition, we use cloud-based enterprise resource planning, ERP, software to manage the business integrating all facets of operations, including manufacturing, finance, and sales and marketing. The data maintained on these systems includes confidential and proprietary information belonging to us, our customers, suppliers, and others.
Increased scrutiny and changing expectations from stakeholders with respect to the Company’s ESG practices may result in additional costs or risks. Companies across many industries are facing increasing scrutiny related to their ESG practices.
Such fluctuations could adversely affect the market price of our common stock. 17 Table of Contents Increased scrutiny and changing expectations from stakeholders with respect to the Company’s ESG practices may result in additional costs or risks. Companies across many industries are facing increasing scrutiny related to their ESG practices.
We have experienced cyber threats and incidents in the past. Although past threats and incidents have not resulted in a material adverse effect, cybersecurity incidents may result in business disruption, loss of data, or unauthorized access to intellectual property which could adversely affect our business.
Although past threats and incidents have not resulted in a material adverse effect, cybersecurity incidents may result in business disruption, loss of data, or unauthorized access to intellectual property which could adversely affect our business. A decrease in customer device failure rates and future changes in semiconductor technologies may result in a decrease in demand for our products.
The data maintained on these systems includes confidential and proprietary information belonging to us, our customers, suppliers, and others. While the Company devotes significant resources to protect its systems and data from unauthorized access or misuse, we are exposed to cybersecurity risks. Our systems are subject to computer viruses, data breach, phishing schemes, and other malicious software programs or attacks.
While the Company devotes significant resources to protect its systems and data from unauthorized access or misuse, we are exposed to cybersecurity risks. Our systems are subject to computer viruses, data breach, phishing schemes, and other malicious software programs or attacks. We have experienced cyber threats and incidents in the past.
There can be no assurance that we will be successful in selecting, developing, manufacturing and marketing new products that satisfy market demand. Any such failure would materially and adversely affect our business, financial condition and results of operations.
There can be no assurance that we will be successful in selecting, developing, manufacturing and marketing new products that satisfy market demand.
Because of the complexity of our products, significant delays can occur between a product’s introduction and the commencement of the volume production of such product.
Any such failure would materially and adversely affect our business, financial condition and results of operations. 12 Table of Contents Because of the complexity of our products, significant delays can occur between a product’s introduction and the commencement of the volume production of such product.
Operational and Other Risks Supply chain issues, including a shortage of critical components or contract manufacturing capacity, could result in a delay in fulfillment of customer orders, or an increase in costs, resulting in an adverse impact on our business and operating results.
It is possible that the businesses we have acquired may perform worse than expected or prove to be more difficult to integrate and manage than anticipated. 14 Table of Contents Operational and Other Risks Supply chain issues, including a shortage of critical components or contract manufacturing capacity, could result in a delay in fulfillment of customer orders, or an increase in costs, resulting in an adverse impact on our business and operating results.
From time to time, cancellations and rescheduling of customer 11 Table of Contents orders have occurred, and delays by our suppliers in providing components or subassemblies to us have caused delays in our shipments of our own products.
From time to time, cancellations and rescheduling of customer orders have occurred, and delays by our suppliers in providing components or subassemblies to us have caused delays in our shipments of our own products. For example, in the second and third quarters of 2024, we experienced significant delays in expected customer orders and an increased frequency of customers rescheduling.
Sales to our five largest customers accounted for approximately 97%, 98%, and 84% of our net sales in fiscal 2023, 2022 and 2021, respectively. During fiscal 2023, two customers accounted for approximately 79% and 10% of our net sales. During fiscal 2022, one customer accounted for approximately 82% of our net sales.
During fiscal 2024, two customers accounted for approximately 67% and 17% of the Company’s net sales. During fiscal 2023, two customers accounted for approximately 79% and 10% of our net sales. During fiscal 2022, one customer accounted for approximately 82% of our net sales.
The failure to obtain timely delivery of supplies, or a significant increase in costs, could result in a material impact in our business and results from operations. We sell our products and services worldwide, and our business is subject to risks inherent in conducting business activities in geographic regions outside of the United States.
The failure to obtain timely delivery of supplies, or a significant increase in costs, could result in a material impact in our business and results from operations. We purchase materials from suppliers worldwide, which subjects the Company to increased risk. We purchase components, sub-assemblies, and chambers from suppliers outside the United States.
Our inability to complete new product development, or to manufacture and ship products in time to meet customer requirements would materially adversely affect our business, financial condition and results of operations. A decrease in customer device failure rates may result in a decrease in demand for our products.
Our inability to complete new product development, or to manufacture and ship products in time to meet customer requirements would materially adversely affect our business, financial condition and results of operations. We are exposed to cybersecurity threats or incidents. We collect, maintain, and transmit data on information systems.
We provide sales and service in North America and Taiwan, operate a sales organization in Germany and a service organization in the Philippines, as well as direct support through third party agreements in China and South Korea.
We provide sales and service globally with resources in North America, Taiwan, Germany, South Korea, and a service organization in the Philippines, as well as direct support through third party agreements in China. We expect that sales of products for delivery outside of the United States will continue to represent a substantial portion of our future sales.
Such developments could have a material adverse effect on our business, financial condition and results of operations. The current economic conditions and uncertainty about future economic conditions make it challenging for us to forecast our operating results, make business decisions, and identify the risks that may affect our business, financial condition and results of operations.
The current economic conditions and uncertainty about future economic conditions, including volatility in the financial markets, national debt, fiscal or monetary concerns, inflation and interest rates, bank failures, and economic recession, make it challenging for us to forecast our operating results, make business decisions, and identify the risks that may affect our business, financial condition and results of operations.
Changes in trade relations, currency fluctuations, or protectionist policies could have a material adverse effect on our business, financial condition or results of operations. Global unrest may impact our ability to sell our products or obtain critical materials.
Changes in trade relations, currency fluctuations, or protectionist policies could have a material adverse effect on our business, financial condition or results of operations. We sell our products and services worldwide, and our business is subject to risks inherent in conducting business activities in geographic regions outside of the United States.
If we are not able to improve our products or develop new products or technologies quickly enough to maintain a competitive position in our markets, our business may decline.
If we are not able to improve our products or develop new products or technologies quickly enough to maintain a competitive position in our markets, it could cause us to lose customers, substantially decrease or delay market acceptance and sales of our products and services, and significantly harm our business, financial condition, and results of operations.
Any failure to control the use, disposal or storage of or adequately restrict the discharge of, hazardous or toxic substances could subject us to significant liabilities. 15 Table of Contents Risks Related to Ownership of our Common Stock Our stock price may fluctuate.
Any failure to control the use, disposal or storage of or adequately restrict the discharge of, hazardous or toxic substances could subject us to significant liabilities. The failure to successfully implement enterprise resource planning and other information systems changes could adversely impact our business and operating results.
There can be no assurance that additional financing will be available when required, or if available, that such financing can be obtained on terms satisfactory to us. We may be subject to litigation relating to intellectual property infringement which would be time-consuming, expensive and a distraction from our business.
This cyclicality may have a material adverse impact on our business performance and financial condition. 16 Table of Contents We may be subject to litigation relating to intellectual property infringement which would be time-consuming, expensive and a distraction from our business.
Our operating results could be adversely affected by fluctuations in the value of the U.S. Dollar relative to other currencies. We purchase materials from suppliers worldwide, which subjects the Company to increased risk. We purchase components, sub-assemblies, and chambers from suppliers outside the United States.
Our operating results could be adversely affected by fluctuations in the value of the U.S. Dollar relative to other currencies. 15 Table of Contents Global unrest may impact our ability to sell our products or obtain critical materials.
The market for semiconductors and semiconductor capital equipment has historically been cyclical, and we expect this to continue in the future. The uncertainty of the semiconductor market may cause some manufacturers in the future to further delay capital spending plans.
The market for semiconductors and semiconductor capital equipment has historically been cyclical, and we expect this trend to continue in the future. If we do not appropriately manage our business operations in response to changing economic and industry conditions, it could have a material and adverse impact on our business performance and financial condition.
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During fiscal 2021, four customers accounted for approximately 24%, 23%, 20% and 10%, respectively, of our net sales. No other customers accounted for more than 10% of our net sales for any of these periods.
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The semiconductor manufacturing industry is highly concentrated, with a relatively small number of large semiconductor manufacturers and contract test and assembly companies accounting for a substantial portion of the purchases of semiconductor equipment. Sales to our five largest customers accounted for approximately 93%, 97%, and 98%, of our net sales in fiscal 2024, 2023, and 2022, respectively.
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The loss of, or reduction or delay of, an order or orders from a significant customer or customers, or a delay in collecting or failure to collect accounts receivable from a significant customer or customers, could adversely affect our business, financial condition and operating results. The semiconductor equipment industry is intensely competitive.
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The concentration of our customer base increases risks related to the financial condition of our customers, and the deterioration in financial condition of a single customer or the failure of a single customer to perform its obligations could have a material adverse effect on our results of operations and cash flow.
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We expect that sales of products for delivery outside of the United States will continue to represent a substantial portion of our future sales.
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If any such customers change their business requirements or focus, vendor selection, project prioritization, or purchasing behavior, or are parties to consolidation transactions, they may delay, suspend, reduce or cancel their purchases of our products or services and our business, financial condition, and results of operations may be adversely affected.
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Inflation reached a 40-year high during 2022, and market rates of interest have risen after a prolonged period at historical lows. The increase in inflation has resulted in a tightening of world-wide monetary policy, which in turn has resulted in an increase in the cost of credit.
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If we fail to operate our business in accordance with our business plan, our operating results, business and stock price may be significantly and adversely impacted. We attempt to operate our business in accordance with a business plan that is established annually, revised as appropriate, and reviewed by management even more frequently.
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Financial turmoil in the banking system and financial markets has resulted, and may result in the future, in a tightening of the credit markets, disruption in the financial markets and global economy downturn. Periodic global economic and semiconductor industry downturns have negatively affected and could continue to negatively affect our business, results of operations, and financial condition.
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Our business plan is developed based on a number of factors, many of which require estimates and assumptions, such as our expectations of the economic environment, future business levels, our customers’ willingness and ability to place orders, lead-times, and future revenue and cash flow. Our budgeted operating expenses, for example, are based in part on our future revenue expectations.
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These events may contribute to significant slowdowns in the industry in which we operate. Difficulties in obtaining capital and deteriorating market conditions can pose the risk that some of our customers may not be able to obtain necessary financing on reasonable terms, which could result in lower sales. Customers with liquidity issues may lead to additional bad debt expense.
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However, our ability to achieve our anticipated revenue levels is a function of numerous factors, including the volatile and historically cyclical nature of our primary industry, customer order cancellations, macroeconomic changes, operational matters regarding particular agreements, our ability to manage customer deliveries, the availability of resources for the installation of our products, delays or accelerations by customers in taking deliveries and the acceptance of our products (for products where customer acceptance is required before we can recognize revenue from such sales), our ability to operate our business and sales processes effectively, and a number of the other risk factors as described in this Item 1A.
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Turmoil in the international financial markets has resulted, and may result in the future, in dramatic currency devaluations, stock market declines, restriction of available credit and general financial weakness. In addition, flash memory and other similar device prices have historically declined and will likely do so again in the future. These developments may affect us in several ways.
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Because our expenses are in most cases relatively fixed in the short term, any revenue shortfall below expectations could have an immediate and material adverse effect on our operating results.
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Economic conditions may also affect the ability of our customers to meet their payment obligations, resulting in cancellations or deferrals of existing orders and limiting additional orders. In addition, some governments have subsidized portions of fabrication facility construction, 14 Table of Contents and financial turmoil may reduce these governments’ willingness to continue such subsidies.
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Similarly, if we fail to manage our expenses effectively or otherwise fail to maintain rigorous cost controls, we could experience greater than anticipated expenses during an operating period, which would also negatively affect our results of operations.
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If such conditions recur, and we are not able to timely and appropriately adapt to changes resulting from the difficult macroeconomic environment, our business, financial condition or results of operations may be materially and adversely affected.
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If we fail to operate our business consistent with our business plan, our operating results in any period may be materially and adversely impacted.
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If we are not able to reduce our operating expenses sufficiently during periods of weak revenue, or if we utilize significant amounts of cash to support operating losses, we may erode our cash resources and may not have sufficient cash to operate our business.
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Such an outcome could cause customers, suppliers or investors to view us as less stable, or could cause us to fail to meet financial analysts’ revenue or earnings estimates, any of which could have an adverse impact on our stock price. 13 Table of Contents In addition, our management is constantly striving to balance the requirements and demands of our customers with the availability of resources, the need to manage our operating model and other factors.
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We have in the past, in the face of a downturn in our business and a decline in our net sales, implemented a variety of cost controls and restructured our operations with the goal of reducing our operating costs to position ourselves to more effectively meet the needs of the then weak market for test and burn-in equipment.
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In furtherance of those efforts, we often must exercise discretion and judgment as to the timing and prioritization of manufacturing, deliveries, installations and payment scheduling.
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While we took significant steps to minimize our expense levels and to increase the likelihood that we would have sufficient cash to support operations during the downturn, we have experienced historical operating losses.
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Any such decisions may impact our ability to recognize revenue, including the fiscal period during which such revenue may be recognized, with respect to such products, which could have a material adverse effect on our business, results of operations or stock price. Over the past year, the Company has increased inventory levels significantly.
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We anticipate that our existing cash balance together with income from operations, collections of existing accounts receivable, revenue from our existing backlog of products, the sale of inventory on hand, and deposits and down payments against significant orders, and available balance under our ATM offering, will be adequate to meet our working capital and capital equipment requirements.
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This decision was driven by previously experienced long lead time in obtaining critical parts and in producing the systems and by higher projected revenues. As a result, if actual revenues do not meet these projections, the Company may face challenges related to excess inventory, including potential write-downs or obsolescence, which could adversely affect our financial results.
Removed
Depending on our rate of growth and profitability, and our ability to obtain significant orders with down payments, we may require additional equity or debt financing to meet our working capital requirements or capital equipment needs.
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We are exposed to risks related to our commercial terms and conditions, including our indemnification of third parties, as well as the performance of our products.
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The price of our common stock has fluctuated in the past and may fluctuate significantly in the future.
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Although our standard commercial documentation sets forth the terms and conditions that we intend to apply to commercial transactions with our business partners, counterparties to such transactions may not explicitly agree to our terms and conditions.
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The collapse of certain U.S. banks and potentially other financial institutions may have adverse impacts on our business. On March 10, 2023, Silicon Valley Bank (“SVB”) was shut down, followed on March 11, 2023 by Signature Bank and the Federal Deposit Insurance Corporation was appointed as receiver for those banks.
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In situations where we engage in business with a third party without an explicit master agreement regarding the applicable terms and conditions, or where the commercial documentation applicable to the transaction is subject to varying interpretations, we may have disputes with those third parties regarding the applicable terms and conditions of our business relationship with them.
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Since that time, there have been reports of instability at other U.S. banks. The Company’s cash and investment balances held at banks and brokerage firms may at time exceed federally insured levels.
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Such disputes could lead to a deterioration of our commercial relationship with those parties, costly and time-consuming litigation, or additional concessions or obligations being offered by us to resolve such disputes, or could impact our revenue or cost recognition. Any of these outcomes could materially and adversely affect our business, financial condition and results of operations.
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On March 15, 2023, the Company filed a Current Report on Form 8-K with the SEC, disclosing its exposure to SVB and stating that the Company did not expect a significant impact on its operations. 16 Table of Contents Item 1B. Unresolved Staff Comments None.
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In addition, in our commercial agreements, from time to time in the normal course of business, we indemnify third parties with whom we enter into contractual relationships, including customers, suppliers and lessors, with respect to certain matters.
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We have agreed, under certain conditions, to hold these third parties harmless against specified losses, such as those arising from a breach of representations or covenants, third party claims that our products, when used for their intended purposes, infringe the IP rights of such third parties, or other claims made against certain parties.
Added
We may be compelled to enter into or accrue for probable settlements of alleged indemnification obligations, or we may be subject to potential liability arising from our customers’ involvements in legal disputes.
Added
In addition, notwithstanding the provisions related to limitations on our liability that we seek to include in our business agreements, the counterparties to such agreements may dispute our interpretation or application of such provisions, and a court of law may not interpret or apply such provisions in our favor, any of which could result in an obligation for us to pay material damages to third parties and engage in costly legal proceedings.
Added
It is difficult to determine the maximum potential amount of liability under any indemnification obligations, whether or not asserted, due to our limited history of prior indemnification claims and the unique facts and circumstances that are likely to be involved in any particular claim.
Added
Our business, financial condition and results of operations in a reported fiscal period could be materially and adversely affected if we expend significant amounts in defending or settling any purported claims, regardless of their merit or outcomes. We are also exposed to potential costs associated with unexpected product performance issues.

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Item 2. Properties

Properties — owned and leased real estate

4 edited+1 added−0 removed1 unchanged
Biggest changeThe Company leases a facility in Philippines located in a 2,713 square foot building in Clark Freeport Zone, Pampanga. The lease, which began January 1, 2021 and expires on December 31, 2025, contains an option to renew for another three years at rates stipulated in the contract, notice for renewal is given six months from expiration.
Biggest changeThe Company currently leases a facility in Philippines located in a 6,458 square foot building in Clark Freeport Zone, Pampanga. The lease, amended in 2023, began November 1, 2023 and expires on June 30, 2029 with an option to renew for another three or five years at the prevailing market rate.
The Company periodically evaluates its global operations and facilities to bring its capacity in line with demand and to provide cost efficient services for its customers. In prior years, through this process, the Company has moved from certain facilities that exceeded the capacity required to satisfy its needs.
The Company periodically evaluates its global operations and facilities to bring its capacity in line with demand and to provide cost-effective services for its customers. In prior years, through this process, the Company has moved from certain facilities that exceeded the capacity required to satisfy its needs.
Item 2. Properties The Company’s principal administrative and production facilities are located in Fremont, California, in a 51,289 square foot building. The Company’s lease was renewed in December 2022 and expires in September 2030. The Company leases a 492 square foot sales and support office in Utting, Germany.
Item 2. Properties The Company’s principal administrative and production facilities are located in Fremont, California, in a 51,289 square foot building. The Company’s lease was renewed in December 2022 and expires in September 2030 with an option to extend the lease for another five years. The Company leases a 492 square foot sales and support office in Utting, Germany.
The Company believes that its existing facilities in Fremont, California are adequate to meet its current and reasonably foreseeable requirements. The Company regularly evaluates its expected future facilities requirements and believes that alternate facilities would be available if needed. Item 3. Legal Proceedings None. Item 4. Mine Safety Disclosures Not Applicable PART II
The Company believes that its existing facilities in Fremont, California are adequate to meet its current and reasonably foreseeable requirements. The Company regularly evaluates its expected future facilities requirements and believes that alternate facilities would be available if needed. 19 Table of Contents Item 3. Legal Proceedings None. Item 4.
Added
Mine Safety Disclosures Not Applicable 20 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+0 added−0 removed4 unchanged
Biggest changeHigh Low Fiscal 2023: First quarter ended August 31, 2022 $ 19.43 $ 6.71 Second quarter ended November 30, 2022 27.00 13.00 Third quarter ended February 28, 2023 37.57 17.05 Fourth quarter ended May 31, 2023 40.69 23.11 Fiscal 2022: First quarter ended August 31, 2021 $ 8.60 $ 2.25 Second quarter ended November 30, 2021 27.09 6.83 Third quarter ended February 28, 2022 24.70 10.20 Fourth quarter ended May 31, 2022 13.94 6.86 At August 3, 2023, the Company had 86 holders of record of its common stock.
Biggest changeHigh Low Fiscal 2024: First quarter ended August 31, 2023 $ 54.10 $ 33.72 Second quarter ended November 30, 2023 53.06 21.57 Third quarter ended February 29, 2024 30.50 14.54 Fourth quarter ended May 31, 2024 18.63 10.19 Fiscal 2023: First quarter ended August 31, 2022 $ 19.43 $ 6.71 Second quarter ended November 30, 2022 27.00 13.00 Third quarter ended February 28, 2023 37.57 17.05 Fourth quarter ended May 31, 2023 40.69 23.11 At July 16, 2024, the Company had 97 holders of record of its common stock.
The Company did not repurchase any of its common stock during the fiscal year ended May 31, 2023. 17 Table of Contents Item 6. [Reserved]
The Company did not repurchase any of its common stock in the open market during the fiscal year ended May 31, 2024 because the Company does not have a stock repurchase plan.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

22 edited+36 added−73 removed9 unchanged
Biggest changeNet cash provided by financing activities during the fiscal year ended May 31, 2023 was primarily due to the net proceeds from issuance of common stock from public offering of $6.8 million, and the proceeds from the issuance of common stock under employee benefit plans of $2.6 million, partially offset by the shares repurchased for tax withholdings on vesting of RSUs and PRSUs of $2.1 million.
Biggest changeThe proceeds from the issuance of common stock under employee stock plans in fiscal 2024, 2023 and 2022 were $1.8 million, $2.6 million and $3.6 million, respectively. Cash used in shares repurchased for tax withholdings on vesting of restricted stock units in fiscal 2024, 2023 and 2022 were $1.6 million, $2.0 million and $0.4 million, respectively.
OVERVIEW Aehr Test Systems (“Aehr Test”, “Aehr” or “We”) is a leading provider of test solutions for testing, burning-in, and stabilizing semiconductor devices in wafer level, singulated die, and package part form, and has installed thousands of systems worldwide.
Overview Aehr Test Systems (“Aehr Test”, “Aehr”, the “Company” or “We”) is a leading provider of test solutions for testing, burning-in, and stabilizing semiconductor devices in wafer level, singulated die, and package part form, and has installed thousands of systems worldwide.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.
Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).
Performance obligations include sales of systems, contactors, spare parts, and services, as well as installation and training services included in customer contracts. 18 Table of Contents A contract’s transaction price is allocated to each distinct performance obligation.
Performance obligations include sales of systems, contactors, spare parts, and services, as well as installation and training services included in customer contracts. A contract’s transaction price is allocated to each distinct performance obligation.
Our net sales consist primarily of sales of FOX-P 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 revenue consists primarily of sales of FOX-P systems, WaferPak Aligners and DiePak Loaders, WaferPak Contactors, DiePak Carriers, test fixtures, upgrades and spare parts, service contracts revenues, and non-recurring engineering charges.
Net sales of our wafer-level test products 20 Table of Contents for fiscal 2023 were $63.5 million and increased approximately $14.6 million from fiscal 2022 due to strong demand for our FOX-P systems. GROSS PROFIT.
Revenue of our wafer-level test products and services for fiscal 2023 were $63.5 million and increased by $14.6 million from fiscal year 2022 due to strong demand for our FOX-P systems.
The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.
The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenues, inventories, and income taxes, among others.
In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled. The Company generally does not grant return privileges, except for defective products during the warranty period.
In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled.
Those results form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
Our estimates are derived from historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Those results form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
INVENTORY OBSOLESCENCE In each of the last three fiscal years, we wrote down our inventory for estimated obsolescence or unmarketable inventory by an amount equal to the difference between the cost of inventory and the net realizable value based upon assumptions about future demand and market conditions, see Note 7, “Balance Sheet Detail.” If future market conditions are less favorable than those projected by management, additional inventory write-downs may be required.
Inventory Valuation We write down the carrying value of our inventory to net realizable value for estimated obsolescence or unmarketable inventory in an amount equal to the difference between the cost of inventory and its estimated realizable value based upon assumptions about future demand and market conditions.
LIQUIDITY AND CAPITAL RESOURCES We consider cash, cash equivalents and short-term investments as liquid and available for use. As of May 31, 2023 and 2022, respectively, we had $30.2 million and $31.6 million in cash, cash equivalents and restricted cash. We also had $17.9 million in short-term investments as of May 31, 2023.
Liquidity and Capital Resources Cash, cash equivalents, and restricted cash were $49.3 million as of May 31, 2024, compared to $30.2 million as of May 31, 2023. Short term investments were $0 as of May 31, 2024, compared to $17.9 million as of May 31, 2023.
R&D expenses were $7.1 million for the fiscal year ended May 31, 2023, compared with $5.8 million for the fiscal year ended May 31, 2022, an increase of 22.6%. The increase in R&D expenses was primarily due to increases in project expenses of $0.6 million and employment-related expenses of $0.5 million related to R&D initiatives during fiscal 2023.
Research and development expenses increased by $1.3 million in fiscal year 2023 over fiscal year 2022, primarily due to increases in project expenses of $0.6 million and employment-related costs of $0.5 million related to research and development initiatives during fiscal 2023.
OFF-BALANCE SHEET FINANCING We have not entered into any off-balance sheet financing arrangements and have not established any special purpose or variable interest entities. 23 Table of Contents OVERVIEW OF CONTRACTUAL OBLIGATIONS The following table provides a summary of such arrangements, or contractual obligations.
In fiscal 2022, the Company also repaid the line of credit of $1.4 million. Off-Balance Sheet Financing We have not entered into any off-balance sheet financing arrangements and have not established any special purpose or variable interest entities.
Gross profit margin increased to 46.6% for the fiscal year ended May 31, 2022 from 36.3% for the fiscal year ended May 31, 2021. The increase in gross profit margin was primarily the result of manufacturing efficiencies due to an increase in net sales. SELLING, GENERAL AND ADMINISTRATIVE.
Gross margin increased to 50.4% in fiscal year 2023 from 46.6% in fiscal year 2022. The increase in gross margin of 3.8% was primarily the result of a decrease in inventory reserve provisions, an increase in manufacturing efficiencies as a result of higher sales volume, and a decrease in direct material costs.
The Company has elected the practical expedient to not assess whether a contract has a significant financing component as the Company’s standard payment terms are less than one year. We sell our products primarily through a direct sales force. In certain international markets, we sell our products through independent distributors.
Revenue from services is recognized over time as the customer receives the benefit over the contractual period of generally one year or less. The Company has elected the practical expedient to not assess whether a contract has a significant financing component as the Company’s standard payment terms are less than one year.
For contracts that contain multiple performance obligations, the Company allocates the transaction price to the performance obligations on a relative standalone selling price basis. Standalone selling prices are based on multiple factors including, but not limited to, historical discounting trends for products and services and pricing practices in different geographies.
Standalone selling prices are based on multiple factors including, but not limited to, historical discounting trends for products and services and pricing practices in different geographies. Revenue for systems and spares is recognized at a point in time, which is generally upon shipment or delivery and evidenced by transfer of title and risk of loss to the customer.
During the fiscal year ended May 31, 2022, net cash used in investing activities was due to purchases of property and equipment. Financing activities provided cash of $7.3 million and $25.8 million for the fiscal years ended May 31, 2023 and 2022, respectively.
Capital expenditure was primarily for acquisition of testing equipment and manufacturing equipment. 26 Table of Contents Net Cash Flows Provided by Financing Activities Net cash provided by financing activities decreased to $0.1 million for fiscal year 2024, compared to $7.3 million and $25.8 million for fiscal years 2023 and 2022, respectively.
The increase in SG&A expenses was primarily the result of increased shareholder relation costs of $0.5 million, recruiting and relocation of $0.3 million, and employment-related expenses of $0.3 million to support our growing business. RESEARCH AND DEVELOPMENT.
Selling, general and administrative expenses increased by $2.2 million in fiscal year 2023 over fiscal year 2022, primarily due to increased shareholder related costs of $0.5 million, recruiting and relocation expenses of $0.3 million, employment-related costs of $0.6 million because of an increase in headcount to support our growing business, audit and legal service fees of $0.3 million, and travel expenses of $0.2 million.
Gross profit increased to $32.7 million for the fiscal year ended May 31, 2023 from $23.7 million for the fiscal year ended May 31, 2022, an increase of 38.4%. Gross margin increased to 50.4% for the fiscal year ended May 31, 2023 from 46.6% for the fiscal year ended May 31, 2022.
The decrease in gross margin of 1.3% was primarily due to an increase in inventory reserves, as well as an increase in costs from design changes. 24 Table of Contents Gross profit increased to $32.7 million for fiscal year 2023 from $23.7 million for fiscal year 2022.
Net sales increased to $65.0 million for the fiscal year ended May 31, 2023 from $50.8 million for the fiscal year ended May 31, 2022, an increase of 27.8%. The increase in net sales for the fiscal year ended May 31, 2023 was primarily due to the increases in net sales of our wafer-level test products.
Our contactors revenue increased by $15.7 million, and our services revenue increased by $0.3 million. The increase was partially offset by a decrease in systems revenue of $14.7 million. Revenue increased by $14.1 million in fiscal year 2023 over fiscal year 2022, primarily due to the increases in revenue of our wafer-level test products.
Net cash used in investing activities was $18.7 million and $0.4 million for the fiscal years ended May 31, 2023 and 2022, respectively.
Capital expenditure in fiscal 2024, 2023 and 2022 was $0.7 million, $1.4 million and $0.4 million, respectively.
INTEREST INCOME (EXPENSE), NET. Interest income, net was $1.2 million and $13,000 for the fiscal years ended May 31, 2023 and 2022, respectively. Higher interest income for the fiscal year ended May 31, 2023 was driven by higher cash deposits and higher interest rates in fiscal year ended May 31, 2023. GAIN FROM FORGIVENESS OF PPP LOAN.
The decrease was partially offset by higher interest income for the fiscal year 2023, driven by higher cash deposits and higher interest rates.
Removed
On an ongoing basis, we evaluate our estimates, including those related to customer programs and incentives, product returns, bad debts, inventories, investments, income taxes, financing operations, warranty obligations, and long-term service contracts, among others. Our estimates are derived from historical experience and on various other assumptions that are believed to be reasonable under the circumstances.
Added
We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
Removed
Revenue for systems and spares are recognized at a point in time, which is generally upon shipment or delivery. Revenue from services is recognized over time as services are completed or ratably over the contractual period of generally one year or less.
Added
The Company generally does not grant return privileges, except for defective products during the warranty period. 22 Table of Contents For contracts that contain multiple performance obligations, the Company allocates the transaction price to the performance obligations on a relative standalone selling price basis.
Removed
Transfer of control is evidenced upon passage of title and risk of loss to the customer unless we are required to provide additional services. ALLOWANCE FOR DOUBTFUL ACCOUNTS We maintain an allowance for doubtful accounts to reserve for potentially uncollectible trade receivables.
Added
The Company sells its products primarily through a direct sales force. In certain international markets, the Company sells its products through independent distributors.
Removed
We also review our trade receivables by aging category to identify specific customers with known disputes or collection issues. We exercise judgment when determining the adequacy of these reserves as we evaluate historical bad debt trends, general economic conditions in the United States and internationally and changes in customer financial conditions.
Added
We assess the valuation of all inventories, including raw materials, work-in-process, finished goods and spare parts on a periodic basis. Obsolete inventory or inventory in excess of our estimated usage is written down to its estimated market value less costs to sell, if less than its cost.
Removed
Uncollectible receivables are recorded as bad debt expense when all efforts to collect have been exhausted and recoveries are recognized when they are received. WARRANTY OBLIGATIONS We provide and record the estimated cost of product warranties at the time revenues are recognized on products shipped.
Added
The inventory write-downs are established on the basis of obsolete inventory or specifically identified inventory in excess of established usage. Inherent in our estimates of demand and market value in determining inventory valuation are estimates related to economic trends, market conditions, and future demand for our products.
Removed
While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers, our warranty obligation is affected by product failure rates, material usage and service delivery costs incurred in correcting a product failure.
Added
If actual demand and market conditions are less favorable than our projections, additional inventory write-downs may be required.
Removed
Our estimate of warranty reserve is based on management’s assessment of future warranty obligations and on historical warranty obligations. Should actual product failure rates, material usage or service delivery costs differ from our estimates, revisions to the estimated warranty liability would be required.
Added
If the inventory value is written down to its net realizable value, and subsequently there is an increased demand for the inventory at a higher value, the increased value of the inventory is not realized until the inventory is sold either as a component of a system or as separate inventory.
Removed
INCOME TAXES Income taxes are accounted for under the asset-and-liability method as required by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 740, Income Taxes (“ASC 740”).
Added
Income Taxes The determination of our tax provision is highly dependent upon the geographic composition of worldwide earnings and tax regulations governing each region and is subject to judgments and estimates. Management carefully monitors the changes in many factors and adjusts the effective tax rate as required.
Removed
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.
Added
In the past, we assessed the likelihood that we would be able to recover our deferred tax assets. If recovery was not more likely than not, we increased our provision for taxes by recording a valuation allowance to reduce our deferred tax assets to the amount that was more likely than not to be recoverable.
Removed
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period corresponding to the enactment date.
Added
In determining whether the realization of these deferred tax assets would be impaired, we made judgments with respect to whether we were likely to generate sufficient future taxable income to realize these assets.
Removed
Under ASC 740, a valuation allowance is required when it is more likely than not all or some portion of the deferred tax assets will not be realized through generating sufficient future taxable income. As of May 31, 2023 the Company maintained a full valuation allowance against its deferred tax assets.
Added
In order to reverse the valuation allowance, management considered both positive and negative evidence and determined that there was sufficient positive evidence to conclude that it is more likely than not that the deferred tax assets will be realized.
Removed
We will continue to assess whether sufficient future taxable income will be generated to permit the use of deferred tax assets, and will reverse all or a portion of the allowance when there is sufficient evidence to support the reversal.
Added
As a result, we released the entire valuation allowance in fiscal 2024 which contributed to the tax benefit of approximately $20.7 million for the year ended May 31, 2024. Results of Operations Fiscal Year Our fiscal year ended on May 31 for each of our fiscal years in 2024, 2023 and 2022.
Removed
Based upon our prior two fiscal years of profitability, the outlook for the next fiscal year, and absent any additional objective negative evidence, the Company anticipates adjusting the current valuation allowance position in fiscal 2024.
Added
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.
Removed
FASB ASC Subtopic 740-10, Accounting for Uncertainty of Income Taxes, (“ASC 740-10”) defines the criterion an individual tax position must meet for any part of the benefit of the tax position to be recognized in financial statements 19 Table of Contents prepared in conformity with GAAP.
Added
Our first fiscal quarter in fiscal 2025 will end on August 30 and our fiscal year 2025 will end on May 30, 2025. 23 Table of Contents Discussion of Results of Operations Revenues Revenue by Category Year Ended May 31, (Dollars in thousands) 2024 2023 2022 FY 2024 vs FY 2023 FY 2023 vs FY 2022 Products $ 61,729 $ 60,717 $ 47,871 $ 1,012 1.7 % $ 12,846 26.8 % Services 4,489 4,244 2,958 245 5.8 % 1,286 43.5 % Total revenues $ 66,218 $ 64,961 $ 50,829 $ 1,257 1.9 % $ 14,132 27.8 % Products as a percentage of total revenues 93.2 % 93.5 % 94.2 % Services as a percentage of total revenues 6.8 % 6.5 % 5.8 % Revenue increased by $1.3 million in fiscal year 2024 over fiscal year 2023, primarily driven by higher sales in our contactors.
Removed
The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not such tax position will be sustained on examination by the taxing authorities, based solely on the technical merits of the respective tax position.
Added
Revenue by Geography Year Ended May 31, (Dollars in thousands) 2024 2023 2022 FY 2024 vs FY 2023 FY 2023 vs FY 2022 Asia $ 58,076 $ 55,609 $ 45,700 $ 2,467 4.4 % $ 9,909 21.7 % United States 3,532 9,289 5,110 (5,757 ) (62.0 %) 4,179 81.8 % Europe 4,610 63 19 4,547 N.M. 44 231.6 % Total revenues $ 66,218 $ 64,961 $ 50,829 $ 1,257 1.9 % $ 14,132 27.8 % Asia as a percentage of total revenues 87.7 % 85.6 % 89.9 % United States as a percentage of total revenues 5.3 % 14.3 % 10.1 % Europe as a percentage of total revenues 7.0 % 0.1 % 0.0 % N.M.-Not meaningful On a geographic basis, revenues represent products that were shipped to or services that were performed at our customer locations.
Removed
The tax benefits recognized in the financial statements from such a tax position should be measured based on the largest benefit having a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority.
Added
For fiscal year 2024, total revenues increased compared to the same period in the prior year due to an increase in international revenues as a result of more shipments to our customers in Asia and Europe, partially offset by the decline in revenue from a customer in the United states.
Removed
In accordance with the disclosure requirements of ASC 740-10, the Company’s policy on income statement classification of interest and penalties related to income tax obligations is to include such items as part of income taxes.
Added
For fiscal year 2023, both international revenue and domestic revenue increased, compared to the same period in the prior year.
Removed
STOCK-BASED COMPENSATION EXPENSE Stock-based compensation expense consists of expenses for stock options, restricted stock units, or RSUs, and employee stock purchase plan, or ESPP, purchase rights.
Added
Gross Margin Gross Profit by Category Year Ended May 31, (Dollars in thousands) 2024 2023 2022 FY 2024 vs FY 2023 FY 2023 vs FY 2022 Products $ 30,636 $ 30,958 $ 22,207 $ (322 ) (1.0 %) $ 8,751 39.4 % Services 1,907 1,788 1,458 119 6.7 % 330 22.6 % Gross profit $ 32,543 $ 32,746 $ 23,665 $ (203 ) (0.6 %) $ 9,081 38.4 % Gross Margin by Category Product 49.6 % 51.0 % 46.4 % Services 42.5 % 42.1 % 49.3 % Gross margin 49.1 % 50.4 % 46.6 % Gross profit decreased slightly for fiscal year 2024, compared to fiscal year 2023.
Removed
Stock-based compensation cost for stock options and ESPP purchase rights is measured at each grant date, based on the fair value of the award using the Black-Scholes option valuation model, and is recognized as expense over the employee’s requisite service period.
Added
Gross margin decreased to 49.1% in fiscal year 2024 from 50.4% in fiscal year 2023.
Removed
This model was developed for use in estimating the value of publicly traded options that have no vesting restrictions and are fully transferable. Our employee stock options have characteristics significantly different from those of publicly traded options.
Added
Research and Development Year Ended May 31, (Dollars in thousands) 2024 2023 2022 FY 2024 vs FY 2023 FY 2023 vs FY 2022 Research and development $ 8,719 $ 7,134 $ 5,818 $ 1,585 22.2 % $ 1,316 22.6 % As a percentage of total revenues 13.2 % 11.0 % 11.4 % 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.
Removed
For RSUs, stock-based compensation expense is based on the fair value of our common stock at the grant date, and is recognized as expense over the employee’s requisite service period. All of our stock-based compensation is accounted for as an equity instrument.
Added
Research and development expenses increased by $1.6 million in fiscal year 2024 over fiscal year 2023 primarily due to higher employment-related costs of $0.5 million because of an increase in headcount, higher non-recurring engineering services charges of $0.3 million, an increase in allocated facility cost of $0.3 million and an increase in recruiting expenses of $0.2 million.
Removed
The fair value of each option grant and the right to purchase shares under our ESPP are estimated on the date of grant using the Black-Scholes option valuation model with assumptions concerning expected term, stock price volatility, expected dividend yield, risk-free interest rate and the expected life of the award.
Added
Selling, General and Administrative Year Ended May 31, (Dollars in thousands) 2024 2023 2022 FY 2024 vs FY 2023 FY 2023 vs FY 2022 Selling, general and administrative $ 13,746 $ 12,237 $ 10,047 $ 1,509 12.3 % $ 2,190 21.8 % As a percentage of total revenues 20.8 % 18.8 % 19.8 % 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.
Removed
See Note 13 to our consolidated financial statements for detailed information relating to stock-based compensation and the stock option plan and the ESPP. RESULTS OF OPERATIONS The following table sets forth statements of operations data as a percentage of net sales for the periods indicated.
Added
Selling, general and administrative expenses increased by $1.5 million in fiscal year 2024 over fiscal year 2023, primarily due to higher employment-related cost of $1.3 million because of an increase in headcount, and an increase in audit and legal service fees of $0.3 million.
Removed
Year Ended May 31, 2023 2022 2021 Net sales 100.0 % 100.0 % 100.0 % Cost of sales 49.6 53.4 63.7 Gross profit 50.4 46.6 36.3 Operating expenses: Selling, general and administrative 18.8 19.8 39.5 Research and development 11.0 11.5 22.0 Total operating expenses 29.8 31.3 61.5 Income (loss) from operations 20.6 15.3 (25.2 ) Interest income (expense), net 1.9 0.1 (0.3 ) Net gain from dissolution of Aehr Test Systems Japan -- -- 13.2 Gain from forgiveness of PPP loan -- 3.3 -- Other (expense) income, net -- 0.1 (1.0 ) Income (loss) before income tax (expense) benefit 22.5 18.8 (13.3 ) Income tax (expense) benefit (0.1 ) (0.2 ) 1.1 Net income (loss) 22.4 % 18.6 % (12.2 )% FISCAL YEAR ENDED MAY 31, 2023 COMPARED TO FISCAL YEAR ENDED MAY 31, 2022 NET SALES.
Added
Interest and Other Income, Net Year Ended May 31, (Dollars in thousands) 2024 2023 2022 FY 2024 vs FY 2023 FY 2023 vs FY 2022 Interest income $ 2,388 $ 1,245 $ 13 $ 1,143 91.8 % $ 1,232 N.M.
Removed
The increase in gross margin was primarily the result of a decrease in other cost of sales of 1.6 percentage points primarily due to lower costs of provision for inventory reserves, a decrease in labor and overhead of 1.2 percentage points due to manufacturing efficiencies due to higher sales volume, and a benefit of 1.0 percentage points due to lower direct material costs.
Added
Gain from forgiveness of PPP loan - - 1,698 - - (1,698 ) (100.0%) Other income (expense), net (8 ) (3 ) 30 (5 ) 166.7 % (33 ) (110.0%) Interest and other income, net $ 2,380 $ 1,242 $ 1,741 $ 1,138 91.6 % $ (499 ) (28.7%) N.M.-Not meaningful Interest and other income, net, primarily consists of interest income, foreign currency transaction exchange gains and losses and other income (expense).
Removed
SELLING, GENERAL AND ADMINISTRATIVE. SG&A expenses were $12.2 million for the fiscal year ended May 31, 2023, compared with $10.0 million for the fiscal year ended May 31, 2022, an increase of 21.8%.
Added
Interest and other income, net, increased by $1.1 million in fiscal year 2024 over fiscal year 2023, primarily driven by higher interest income earned due to higher average cash and investment balances and higher yields from our investments in money market funds. 25 Table of Contents Interest and other income, net, decreased by $0.5 million in fiscal year 2023 over fiscal year 2022, primarily due to the one-time gain from forgiveness of Payroll Protection Program loan (“PPP Loan”) of $1.7 million in fiscal 2022.
Removed
On June 12, 2021, we received confirmation from SVB that on June 4, 2021, the Small Business Administration approved our Payroll Protection Program loan (“PPP Loan”) forgiveness application for the entire PPP Loan balance of $1,679,000 and interest totaling $19,000, and we recognized a gain of $1,698,000. OTHER (EXPENSE) INCOME, NET.
Added
Provision for Income Taxes Year Ended May 31, (Dollars in thousands) 2024 2023 2022 FY 2024 vs FY 2023 FY 2023 vs FY 2022 Income tax expense (benefit) $ (20,698 ) $ 60 $ 91 $ (20,758 ) N.M $ (31 ) (34.1 %) N.M.-Not meaningful Income tax benefit was $20.7 million in fiscal year 2024, compared to income tax expense of $60 thousand in fiscal year 2023 and $91 thousand in fiscal year 2022.
Removed
Other expense, net was $3,000 for the fiscal year ended May 31, 2023, compared with other income, net of $30,000 for the fiscal year ended May 31, 2022.
Added
A significant income tax benefit in fiscal year 2024 was recognized primarily due to release of a valuation allowance of $21.9 million, as management determined that there was sufficient positive evidence to conclude that it is more likely than not that the deferred tax assets will be realized, which was partially offset by income tax expense of $1.2 million in fiscal year 2024.
Removed
The change in other (expense) income, net was primarily due to losses or gains realized in connection with the fluctuation in the value of the dollar compared to foreign currencies during the referenced periods. INCOME TAX (EXPENSE) BENEFIT. Income tax expense was $60,000 and $91,000 for the fiscal years ended May 31, 2023 and 2022, respectively.
Added
We believe that our existing cash resources and anticipated funds generated from operations will satisfy our cash requirements to fund our operating activities, capital expenditures and other obligations for the next twelve months.

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