REVENUE

9 Months Ended

Feb. 29, 2024

REVENUE

REVENUE

9. 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, 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 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. 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.

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

Disaggregation of revenue

The following presents information about the Company’s net revenues in different geographic areas, which are based upon ship-to locations, and by product category:

	Three Months Ended				Nine Months Ended
	February 29,		February 28,		February 29,		February 28,
(In thousands)	2024		2023		2024		2023
Asia	$	5,167	$	14,849	$	43,320	$	34,873
United States		1,640		2,343		3,105		7,761
Europe		756		14		3,193		58
	$	7,563	$	17,206	$	49,618	$	42,692

	Three Months Ended				Nine Months Ended
	February 29,		February 28,		February 29,		February 28,
(In thousands)	2024		2023		2024		2023
Systems	$	1,971	$	9,821	$	20,750	$	26,315
Contactors		4,759		6,299		25,174		13,400
Services		833		1,086		3,694		2,977
	$	7,563	$	17,206	$	49,618	$	42,692

With the exception of the amount of service contracts and extended warranties, the Company’s product net revenues are recognized at a point in time when control transfers to the customer. The following presents net revenues based on timing of recognition:

	Three Months Ended				Nine Months Ended
	February 29,		February 28,		February 29,		February 28,
(In thousands)	2024		2023		2024		2023
Timing of revenue recognition:
Products and services transferred at a point in time	$	7,240	$	16,863	$	48,225	$	41,523
Services transferred over time		323		343		1,393		1,169
	$	7,563	$	17,206	$	49,618	$	42,692

Contract balances   

Accounts receivable are recognized in the period the Company delivers goods or provides services and when the Company’s right to consideration is unconditional.  Contract assets include unbilled receivables which represent revenues that are earned in advance of scheduled billings to customers. These amounts are primarily related to product sales where transfer of control has occurred but the Company has not yet invoiced. As of February 29, 2024, unbilled receivables were $345,000 and were included in prepaid expenses and other current assets on the accompanying Condensed Consolidated Balance Sheets. Contract assets were not significant as of May 31, 2023.

Contract liabilities include payments received in advance of performance under a contract and are satisfied as the associated revenue is recognized. Contract liabilities as of February 29, 2024 and May 31, 2023 were $486,000 and $2,853,000, respectively, and were included in deferred revenue, short-term and deferred revenue, long-term on the accompanying Condensed Consolidated Balance Sheets. During the three and nine months ended February 29, 2024, the Company recognized $31,000 and $2,802,000 in revenue, respectively, which were included in contract liabilities as of May 31, 2023.

Remaining performance obligations

On February 29, 2024, the Company had $68,000 of remaining performance obligations, which were comprised of service contracts and extended warranty contracts not yet delivered. The Company expects to recognize approximately 30.2% of its remaining performance obligations as revenue in the remainder of fiscal 2024, and an additional 69.8% in fiscal 2025. The foregoing excludes the value of other remaining performance obligations, as they have original durations of one year or less and 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 expenses 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.