Amtech Systems, Inc.

Good day and welcome to the Amtech Systems Fiscal First Quarter 2025 Earnings Conference Call. Please note that this event is being recorded. I would now like to turn the call over to Erika Manion of Sapphire Investor Relations. Please go ahead.

Good afternoon and thank you for joining us for Amtech Systems Fiscal First Quarter 2025 Conference Call. With me on the call today are Bob Daigle, Chairman and Chief Executive Officer, and Dave Jenke, Chief Financial Officer. After close of market today, Amtech released its financial results for the fiscal first quarter of 2025. The earnings release is posted on the company's website at .amtechsystems.com in the investors section. Before we begin, I would like to remind everyone that the Safe Harbors Disclaimer in our public filing covers this call and the webcast. Some of the comments to be made during this call today will contain forward-looking statements and assumptions that are subject to risks and uncertainties, including but not limited to those contained in our SEC filings, all of which are posted within the investors section of our corporate website. The company assumes no obligation to update any such forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements which speak only as of today. These statements do not guarantee a 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 in the forward-looking statements are changes in the technologies used by customers and competitors, change in the volatility and 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, ongoing logistics, supply chain and labor challenges, and capital allocation plans. Other risk factors are detailed in our SEC filings including our Form 10-K and Forms 10-Q. Additionally, in today's conference call, we will be referring to non-GAAP financial measures as we discuss the fiscal first quarter results. You'll find a reconciliation of these non-GAAP measures to our actual GAAP results included in the press release issued today. Now I will turn the call over to AMTAC's Chief Executive Officer, Bob Daigle.

Good afternoon and thank you for joining us today. I'm pleased to report that our first quarter results exceeded our guidance with revenue of $24.4 million and $1.9 million in adjusted EBITDA. While revenue remained muted on a -over-year basis due to continued softness in the markets we serve, our profitability continued to improve with -over-year adjusted EBITDA increasing by $1.8 million. This performance underscores our ongoing focus on operational excellence and cost optimization. Over the past year, we have made significant progress restructuring our business to enhance our cost efficiency and improve our ability to adapt to market demand. These efforts are delivering tangible results. Our restructuring initiatives have yielded over $8 million in annualized cost savings to date, excluding one-time costs, and are expected to generate approximately $9 million in annualized savings by the end of the second fiscal quarter. The adoption of a semi-fabulous model for our capital equipment segment has further strengthened our operating leverage by enabling us to right-size the organization and reduce fixed costs. This transition has positioned us well to efficiently support production with varying levels of market demand. Additionally, over the past several quarters, we implemented pricing actions to offset inflationary pressures and enhance our product margin profile. By the end of the second quarter, we will have shipped the majority of the low-price, lower-margin business in our backlog. Going forward, we will remain vigilant and adjust pricing as necessary to preserve profitability. Turning to our end markets, demand remains muted for equipment and consumables supporting mature node semiconductor production from markets such as industrial equipment and automotive. However, demand for our reflow equipment in leading-edge applications such as AI infrastructure has continued to strengthen. While optimizing our cost structure remains a priority, given the macro backdrop, we are investing in growth initiatives in 2025 and have aligned our organization to better serve our customers. To that end, as we discussed last quarter, we have refined our business segments to provide greater clarity and focus. The Semiconductor Fabrication Solutions business, previously known as the Materials and Substrates segment, includes PR Hoffman and IDI consumables, and Trefix parts and services, as well as some front-end capital equipment used for semiconductor wafer and device fabrication. Meanwhile, the Thermal Process Solutions business, formerly the Semiconductor segment, focuses on reflow equipment for advanced chip packaging and surface mount assembly applications, as well as furnaces for power electronic device production and packaging. Within the Semiconductor Fabrication Solutions business, our goal is to drive long-term, sustainable growth by expanding the reoccurring revenue streams such as consumables, parts, and services. These revenue streams not only provide higher margins but also deliver more predictable, less cyclical revenue growth. To achieve this, we are working to broaden our footprint with existing customers, unlock new opportunities at additional sites, and are actively pursuing opportunities to introduce more of our products to new customers. Additionally, we are leveraging our proven solutions to address similar challenges for other applications. To support these initiatives, we have expanded our team by adding a new business leader for our Semiconductor Fabrication Solutions business, as well as dedicated marketing and application development resources with deep industry knowledge. Although the near-term macro environment remains soft, we are confident about our future. Our restructuring efforts have strengthened our ability to navigate industry cycles, enabling us to generate profits during downturns while unlocking significant operating leverage as business scales. Looking forward, our long-term growth drivers remain robust. Investments in AI-related infrastructure and supply chain diversification are expected to drive a recovery in the capital equipment demand. While expectations for EV growth have moderated, we still anticipate double-digit expansion in this segment, which will continue to fuel demand for our silicon carbide-related consumables. In the medium term, we expect our focus on growing our consumables, parts, and services offerings will provide higher margins and improve stability. Meanwhile, growing momentum in advanced packaging is providing a tailwind to capital equipment demand. Together, we believe these strategic initiatives and industry dynamics position us well for sustained growth and long-term value creation in the years ahead. With that, I'll turn it over to Wade for further details on our financial results. Thank you, Bob.

For fiscal Q1, net revenues increased 1% sequentially from last quarter and decreased 2% from a year ago. The sequential increase from last quarter is primarily due to increased sales of our diffusion and high-temperature furnaces, partially offset by lower sales of our wafer cleaning equipment. The decrease from the prior year is primarily attributable to lower sales of the wafer cleaning equipment. In the first quarter of fiscal 2025, our gap gross margin decreased by 0.4 million sequentially, compared to last quarter due to a less favorable product mix. Gap gross margin increased by $1.1 million compared to a year ago. This is driven by better margin profiles and cost save despite lower revenue. And due to intangible asset impairment last year by 0.8 million. Selling general and administrative expenses decreased by 0.7 million sequentially from last quarter and decreased 0.5 million from a year ago. The decrease across both periods are primarily due to fixed cost reductions by our efforts. Research, development, and engineering expenses decreased by 0.1 million sequentially from last year. And decreased by 0.7 million from a year ago. The sequential decrease is primarily due to the timing of purchases related to specific R&D projects. The decrease from a year ago is attributable to development efforts in our semiconductor fabrication solution segment that did not reoccur. Gap net income for the first quarter of fiscal 2025 was 0.3 million or two cents per share. This compares to gap net loss of 0.5 million or four cents per share for the preceding quarter. And gap net loss of 9.4 million or 60 cents per share for the first quarter of fiscal 2024. Non-gap net income for the first quarter of fiscal 2025 was 0.8 million or six cents per share. This compares to non-gap net loss of 7,000 or zero cents per share for the preceding quarter. And non-gap net loss of 0.6 million or four cents per share for the first quarter of fiscal 2024. Unrestricted cash and cash equivalents at December 31, 2024 was 13.2 million compared to 11.1 million at September 30, 2024. Due to stronger accounts receivable collection and inventory management effort during the quarter. Now turning to our outlook for the second fiscal quarter ending March 31, 2025. We expect revenues in the range of 21 to 23 million with adjusted EBITDA nominally positive. Although the near-term outlook for revenue and earnings remains challenging, we remain confident that our long-term future prospects are strong for both our consumables and equipment serving advanced mobility and advanced packaging applications. We continue to optimize and reduce AMTEC structural costs. These steps should significantly improve results and enhance profitability through market cycles. Operating results can be significantly impacted positively or negatively by timing of orders. System shipments, logistical challenges, and the financial results of semiconductor manufacturers. Additionally, semiconductor equipment industries can be cyclical and inherently impacted by changes in market demand. Actual results may differ materially in the weeks and months ahead. A portion of AMTEC's results is denominated in RMBs, a Chinese currency. The outlet provided is based on an assumed exchange rate between the United States dollar and the RMB. Changes in the value of the RMB related to the US dollar could cause actual results to differ from expectations. I will now turn the call over to the operator for questions. Operator.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star two. If you're using a speakerphone, please lift the handset before pressing any keys. Your first question comes from the line of Kevin Garigan from Rosenblatt Security. Your line is now open.

Yeah, hey guys, great seeing with you again and congrats on the results. So just the first one, you guys have done a great job with the restructuring plan. Are there still additional costs that you can kind of take out of the business and if so, what areas would those kind of be in? Yeah, hi Kevin.

Thanks for joining the call. Yeah, you know we're continuing to work on things. There's a lot in supply chain management and that we've basically have in the pipeline right now where we've found and it takes a lot of work through because we do have some inventory in place but that we can through better sourcing practices, better supply chain management, able to significantly reduce the input costs for some of the equipment in our business. I'd say the other area we're looking at in terms of footprint utilization is where there's opportunities to really free up some space. We're trying to do that, reduce some of the fixed costs there as well. So there are always things. Our teams have been very good in terms of identifying these opportunities and converting them into real savings for us and we'll continue to make that a focus in 2025.

Got it. Okay, that makes sense. And then so second question, throughout this kind of earnings season we've heard mixed outlook so far, especially with regards to the automotive market. So can you just kind of talk a little bit more about what you're seeing in the market? I mean, has it gotten better or worse versus kind of three months ago?

Yeah, I mean, our guidance, as we pointed out, the 21 to 23 reflects the fact that I think we're continuing to see softness in that segment and I'd say it's been particularly weak in the equipment side of things that are automotive related. So I don't, you know, again, I haven't heard anything suggesting that there's a sharp recovery. A couple of the OEMs have reported that they think we've passed bottom. A couple are still saying things are very weak. So we're assuming things will stay soft. And, you know, I did maybe a little bit of color on, you know, our growth initiatives, kind of the philosophy we've operated on, the focus of the past year, frankly, has been on improving our cost structure, operating leverage. And now the pivot is really, you know, I'm accustomed to you control your own destiny on growth as well as costs. And, you know, we were starting to resource efforts to really broaden what we do in the marketplace in these markets so that, you know, the hope and the approach we're taking is really, you know, eventually you get market recovery. But we really want to drive organic growth that's beyond just market recovery. And then I think that that's really our focus right now is, you know, get a little bit more control over our own destiny and then the markets are cyclical, they'll come back. But in the meantime, there's work we can do to improve revenue.

Okay. Yeah, that makes sense. That answers your question again.

Yes,

yes, it does. Thank you. And then just, just as my final question, Bob, you had mentioned that you were you're seeing more activity in the advanced patch packaging space. Can you just kind of give us a little more color on what you're seeing in that area? And as as AI kind of moves from training to inference and more towards the edge, where companies are looking for more efficient chips, you know, do you guys expect to see stronger growth from from this trend?

Yeah, you know, let me give you a little bit of the, you know, we talked about the past couple of quarters that we've been seeing strengthening in the advanced packaging area. And the our customer base, generally, it's, it's the OSATs in a lot of cases. So it's the guys who are packaging, you know, the chipsets for for the AI data centers. But I do believe we're going to we're going to start to see, you know, proliferation of more hardware out there to support AI on the edge. And I think they'll drive more volume, which should should bode well for the the advanced packaging equipment side of things. So it's been a couple of quarters where we've seen some meaningful strengthening versus where we were sitting in 2024 for, you know, our equipment. And it is and it is the the players we're dealing with are the ones who are are have been successful in the industry.

Okay, perfect. I appreciate the color. Thanks, guys.

All right. Thanks, Kevin. As a reminder, if you have a question, please press star one on your telephone keypad. There are no further questions at this time. I will now turn the call back to Bob Daigle. Please continue.

Well, thank you for joining our conference call today and we look forward to updating you on the progress we're making in the months to come. And have a good afternoon. Good

evening. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. Thank you for your time. Thank you for your time. Thank you for your time. You may now disconnect.