Amtech Systems, Inc.

Good day and welcome to the Amtech Systems Fourth Quarter and Fiscal Year 2020 Earnings Conference Call. Please note that this event is being recorded. I would now like to turn the call over to Erica Mannion of Sapphire Investor Relations. Please go ahead.

Good afternoon and thank you for joining us for Amtech Systems Fourth Quarter and Fiscal Year 2020 Conference Call. With me today on the call are Michael Wang, Chief Executive Officer, and Lisa Gibbs, Chief Financial Officer. After closing market today, Amtech released its financial results for the fourth quarter in fiscal year 2020. That earnings release is posted on the company's website at www.amtechsystems.com in the Investors section. During today's call, management will make forward-looking statements. All such forward-looking statements are based on information available as of this date, and the company assumes no obligation to update any such forward-looking statements. These statements are not a guarantee of future performance, and actual results could differ materially from current expectations. Among the important factors which could cause actual results to differ materially from those that are in forward-looking statements are changes in the technologies used by customers and competitors, changes in volatility and the demand for products, the effect of changing worldwide political and economic conditions, including trade sanctions, the effect of overall market conditions, including the equity and credit markets and market acceptance risks, capital allocation plans, and the worldwide COVID-19 pandemic. Other risk factors are detailed in the company's SEC filings, including its Form 10-K and Forms 10-Q. I will now turn the call over to Michael Wang, Chief Executive Officer.

Thank you, Erica. I want to take a moment to reflect on how our business has performed over the last 12 months. After a very strong demand environment in 2018 and a lull in 2019 due to the start of the trade war between USA and China, we entered 2020 expecting an industry rebound in the spending cycle, which was reflected in a $20 million Q1. Unfortunately, the anticipated growth in 2020 was halted in the second quarter by the initial spread of the COVID pandemic throughout Asia-Pacific region. creating significant supply chain disruptions as well as in-market demand uncertainty on the part of our customers. As a year progressed, almost all geographies were impacted, creating more volatility and uncertainty to the global economy and potential growth catalysts. Despite this backdrop, including the natural volatility of the capital equipment markets we serve, who are successful in mitigating disruptions to our business while limiting operating losses to nominal levels. That said, I want to personally thank the entire team at Amtech, our supply chain partners, and our customers for their hard work and flexibility navigating both the pandemic and the trade environment challenges placed in front of us throughout this year. With their diligent efforts, we successfully endured the worst of the pandemic impact while maintaining the high levels of service our customers require and expect from us. As we look ahead, uncertainty remains at varying levels based on geography. Within the Asia-Pacific region, which has historically been our largest market, demand remains strong as these economies were the first to reopen after the pandemic, allowing customers to resume capital expansion plans. While demand remains at muted levels relative to years past, we believe portions of the Asia Pacific market, such as semiconductor packaging, have returned to normalized levels, and others, such as automotive modules and subsystems, are beginning to show signs of improvement. As a result, we remain optimistic regarding continued strength in the quarter ahead. Outside of the Asia Pacific region, both the U.S. and European markets continue to lag. As our customers gain confidence in the strength of near-term and mid-term end-market demand, deal conversations continue to improve off the second and third quarter lows. However, progress from coding activity to purchase orders remain below pre-pandemic levels. While we remain cautious, particularly in light of the rising infection rates in both the United States and Europe and the possibility of additional shutdowns, We believe our customers are gradually returning to business as usual. When evaluating our business by end market, the long-term silicon carbide opportunity remains very strong as demand for devices continue to outstrip supply. With the acceleration of new electric vehicle platform announcements, many of which leverage silicon carbide's unique performance attributes to improve efficiency while decreasing size and weight and lead times for power devices are reaching at an all-time high. As such, the industry as a whole should be focused on rapidly increasing device capacity to meet this growing need, which also requires increased SIC wafer capacity. With that said, it's important to note that the manufacturing of silicon carbide devices is certainly broken down into two distinct segments. Creation of the silicon carbide wafers themselves, which our tools and consumable products address, and the subsequent processing of silicon carbide devices on those wafers. Specific to wafer fabrication, we believe many customers are currently adding incremental capacity by improving their efficiencies in the process including improving yields and continuing the transition from 4-inch to 6-inch wafers. It is our expectation that while these actions are effective in creating additional capacity in the short term, A sheer volume associated with increased demand in 2021 and beyond will require large-scale increases in wafer capacity over time. Given our market-leading position in consumables, roadmap for new equipment platforms, and recently completed capacity expansion investments for our silicon carbide manufacturing operations, we are well positioned to capture this opportunity when it emerges. Within power semiconductors, the magnitude of the overall opportunity remains large, supported by both the increasing needs of automotive platforms as well as the proliferation of new applications such as 5G in the telecom market, automation, and IoT in the industrial market. Similar to the silicon carbide market, as future demand outpaces existing supply, power semiconductor manufacturers will be ramping up their capacity investments. For these market leaders in this space, capacity increases typically include a transition from 200 mm to 300 mm wafers due to the economic advantages the larger diameters provide. It is within this specific market shift where Amtech is particularly well positioned with our semi-compliant clustered 300 mm horizontal diffusion furnaces. Unlike traditional silicon-based semiconductor manufacturing, which utilizes vertical furnaces at 300 millimeter, the unique characteristics of power devices require horizontal furnaces to solve yield loss issues associated with wafer blowing and crystalline defects at high temperatures, normally 1,100 degrees C and above. Having partnered with industry pioneer in the transition from 200 millimeter to 300 millimeter for power devices, Amtek is in a great position of having a multi-year lead in this particular segment of the industry, created not only by having the largest install base in the market today, but also a tool of record for three leading power semiconductor manufacturers. With the addition of one new customer and one follow-on order in 2020, despite market uncertainty, We believe this is a clear signal of not only the robustness of long-term growth drivers for power semi-devices, but also the willingness of customers to expand capacity to serve the growing market. Given our track record of performance and market leadership, we believe we are well positioned to serve continuing customer demand and orders as they look to expand capacity in 2021 and beyond. Moving on to the reflow of the market, our served markets can generally be broken down into two main applications, namely semiconductor packaging and electronic systems, such as automotive subsystems and advanced printed circuit board assembly. Within semiconductor packaging, 2020 represented a record year for Amtek, with a 20% year-over-year growth driven largely by advanced packaging applications. The performance requirements for advanced packaging processes, such as flip-chip and fan-out panel-level packaging, which today represents the majority of the overall advanced packaging market, play directly into the strengths of our products. For example, as the industry moves to more complex processes and applications, such as antenna and package for 5G devices, leading outsourced semiconductor assembly and test manufacturers, or OSATs, are increasingly looking to us to provide the highest level of reflow precision and uniformity these processes require. In addition to the direct benefit of the sales of these systems, the growth and semi-packaging capacity serves as a leading indicator for the broader industry growth, including markets served by our other products. It is typical to see leading-edge OSATs first add capacity for memory and logic, and follow up with capacity expansion for supporting components in electronic systems such as analog power and RF devices as well as advanced circuit boards. As we look ahead, we are encouraged both by the continuing strength we are seeing in the semi-packaging market as well as the increasing level of dialogue with customers signaling a return of demand within the automotive market off the current unit levels. All in all, as we stated previously, we remain excited as ever about mid- to long-term opportunities in front of us. The near-term growth catalyst for our business will continue to be tied to our customers' confidence in the economic outlook and demand growth. In order to support these opportunities, we are continuing to execute on our strategic initiatives, namely new product development to drive organic revenue growth and continuous operational improvement. In addition, we continue to evaluate strategic acquisition opportunities to expand our product and technology portfolios to build upon our strengths in the areas that we believe will outperform the overall semi-market. As demonstrated in our financial performance throughout 2020, we are fortunate to have a business that is well equipped to navigate times of uncertainty like those we now find ourselves in. Looking out to 2021 and beyond, we remain excited about the opportunity to drive increased profitability and shareholder value as demand accelerates and we realize the operating leverage built into our current business model. And I now turn the call over to Lisa to review our fourth quarter and full year financial results. Lisa?