REVENUE

6 Months Ended

Nov. 30, 2022

REVENUE

REVENUE

3. REVENUE

Revenue recognition

The Company recognizes revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services by following a five-step process: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price, and (5) recognize revenue when or as the Company satisfies a performance obligation, as further described below.

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. 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.

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.

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.

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.

The Company sells its products primarily through a direct sales force. In certain international markets, the Company sells its products through independent distributors.

Transfer of control is evidenced upon passage of title and risk of loss to the customer unless we are required to provide additional services.

Disaggregation of revenue

The following tables show revenues by major product categories. Within each product category, contract terms, conditions and economic factors affecting the nature, amount, timing and uncertainty around revenue recognition and cash flow are substantially similar.

The Company’s revenues by product category are as follows (in thousands):

	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2022		2021		2022		2021
Type of good / service:
Systems	$	7,400	$	3,754	$	16,494	$	7,633
Contactors		6,607		5,090		7,101		6,042
Services		808		767		1,891		1,582
	$	14,815	$	9,611	$	25,486	$	15,257
Product lines:
Wafer-level	$	14,401	$	9,107	$	24,723	$	14,250
Test During Burn-In		414		504		763		1,007
	$	14,815	$	9,611	$	25,486	$	15,257

The following presents information about the Company’s operations in different geographic areas. Net sales are based upon ship-to location (in thousands):

	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2022		2021		2022		2021
Geographic region:
United States	$	2,555	$	895	$	5,418	$	1,401
Asia		12,216		8,716		20,024		13,853
Europe		44		-		44		3
	$	14,815	$	9,611	$	25,486	$	15,257

With the exception of the amount of service contracts and extended warranties, the Company’s product category revenues are recognized at the point in time when control transfers to customers. The following presents revenue based on timing of recognition (in thousands):

	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2022		2021		2022		2021
Timing of revenue recognition:
Products and services transferred at a point in time	$	14,427	$	9,270	$	24,681	$	14,560
Services transferred over time		388		341		805		697
	$	14,815	$	9,611	$	25,486	$	15,257

Contract balances

A receivable is recognized in the period the Company delivers goods or provides services or when the Company’s right to consideration is unconditional. The Company usually does not record contract assets because the Company has an unconditional right to payment upon satisfaction of the performance obligation, and therefore, a receivable is more commonly recorded than a contract asset.

Contract liabilities include payments received in advance of performance under a contract and are satisfied as the associated revenue is recognized. Contract liabilities are reported on the Condensed Consolidated Balance Sheets at the end of each reporting period as a component of deferred revenue. Contract liabilities as of November 30, 2022 and May 31, 2022 were $3,705,000 and $2,484,000, respectively. During the three and six months ended November 30, 2022, the Company recognized $44,000 and $2,115,000, respectively, of revenues that were included in contract liabilities as of May 31, 2022.

Remaining performance obligations

On November 30, 2022, the Company had $135,000 of remaining performance obligations, which were comprised of deferred service contracts and extended warranty contracts not yet delivered. The Company expects to recognize approximately 49% of its remaining performance obligations as revenue in the remainder of fiscal 2023, and an additional 51% in fiscal 2024 and thereafter. The foregoing excludes the value of other remaining performance obligations as they have original durations of one year or less, and also excludes information about variable consideration allocated entirely to a wholly unsatisfied performance obligation.

Costs to obtain or fulfill a contract

The Company generally expenses sales commissions when incurred as a component of selling, general and administrative expense as the amortization period is typically less than one year. Additionally, the majority of the Company’s cost of fulfillment as a manufacturer of products is classified as inventory and fixed assets, which are accounted for under the respective guidance for those asset types. Other costs of contract fulfillment are immaterial due to the nature of the Company’s products and their respective manufacturing process.