Q1 2024 Amtech Systems Inc Earnings Call

Operator: Good day, and welcome to the Amtech Systems Fiscal First Quarter 2024 Earnings Conference. Please note that this call is being recorded.

Good day and welcome to the Amtech systems fiscal first quarter 2024 earnings Conference call. Please note that this call is being recorded I would now like to turn the call over to Erica Mannion of Sapphire Investor Relations. Please go ahead.

Erika Mannion: I would now like to turn the call over to Erika Mannion of Sapphire Investor Relations. Good morning, and thank you for joining us for Amtech Systems' fiscal first quarter 2024 conference call. With me on the call today are Bob Daigle, Chairman and Chief Executive Officer of Amtech, Lisa Gibbs, Chief Financial Officer, and Paul Lancaster, Vice President of Sales and Customer Service. After the close of market Friday, Amtech released its financial results for the first quarter of 2024.

Good morning, and thank you for joining us for Amtech systems fiscal first quarter 2024 conference call with me on the call today are Bob Daigle, Chairman and Chief Executive Officer, Lisa Gibbs, Chief Financial Officer, and Paul Lancaster, Vice President of sales and customer service after close of market Friday.

<unk> released its financial results for the first quarter of 2020 for the earnings release is posted on the company's website at Www Dot Amtech Systems' dot com in the investors section before we begin I'd like to remind everyone that the safe Harbor disclaimer in our public filings covers this call and our webcast some.

Erika Mannion: The earnings release is posted on the company's website at www.amtechsystems.com in the investor section. Before we begin, I'd like to remind everyone that the Safe Harbors disclaimer in our public filings covers this call and our webcast. Some of the comments to be made during today's call 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 investor section of our corporate website. The company assumes no obligation to update any such forward-looking statement.

The comments to be made during today's call will contain forward looking statements and assumptions that are subject to risks and uncertainties, including but not limited to those can change 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 in place undue reliance on forward looking statements, which speak only as of today.

Erika Mannion: You are cautioned not to place undue reliance on forward-looking statements which speak only as of today. These statements are not a guarantee of future performance, and actual results could differ significantly 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, 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, ongoing logistics, supply chain, and labor challenges, capital allocation plans, and the COVID-19 pandemic. Other risk factors are detailed in our SEC filings, including our Form 10-K and Forms 10-Q.

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 in the forward looking statements or changes in the technologies used by customers and competitors change in volatility 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 ongoing logistics supply chain and labor challenges capital allocation plans and the COVID-19 pandemic.

Other risk factors are detailed in our SEC filings, including our Form 10-K and Form 10-Q.

Robert C. Daigle: Additionally, in today's conference call, we will be referring to non-GAAP financial measures as we discuss the first quarter financial results. You'll find a reconciliation of these non-GAAP measures to our actual GAAP results included in the press release issued on Friday. I will now turn the call over to Amtech's Chief Executive Officer, Bob Daigle. Good morning, everyone.

Additionally, in today's conference call, we will be referring to non-GAAP financial measures as we discuss the first quarter financial results.

You'll find a reconciliation of these non-GAAP measures to our actual GAAP results included in the press release issued on Friday.

Now I'll turn the call over to <unk>, Chief Executive Officer, Bob Daigle.

Good morning, everyone. Thank you for joining <unk> quarterly conference call.

Robert C. Daigle: Thank you for joining Amtech's quarterly conference call. I'm pleased with the progress we're making to improve our cost structure and position the company for strong operating results as markets recover. We remain focused on operational optimization, having achieved over $6 million in annualized cost savings through actions implemented over the past four months. Revenue of $24.9 million exceeded the high end of our guidance range.

I'm pleased with the progress, we're making to improve our cost structure and position the company for strong operating results as markets recover.

We remain focused on operational optimization, having achieved over $6 million in annualized cost savings through actions implemented over the past four months.

Revenue of $24 9 million exceeded the high end of our guidance range.

Robert C. Daigle: More importantly, adjusted EBITDA of $0.2 million surpassed our expectations, marking a significant improvement from the $2.4 million adjusted EBITDA loss in the prior quarter. The macroeconomic landscape for our target end markets remains somewhat mixed, especially within the semiconductor market. In this broad sector, we continue to experience softness and near-term demand for equipment used for most wafer fabrication and back-end packaging applications as the industry digests existing capacity and evaluates expansion plans for the upcoming quarter. However, amidst this backdrop, we are seeing pockets of resilience, particularly in sub-markets related to hybrid and electric vehicles.

More importantly, adjusted EBITDA of <unk> 2 million surpassed our expectations, marking a significant improvement from the $2 $4 million adjusted EBITDA loss in the prior quarter.

The macroeconomic landscape for our target end markets remains somewhat mix.

Especially within the semiconductor market.

In this broad sector, we continue to experience softness in near term demand for equipment used for most wafer fabrication.

And back end packaging applications as the industry digests existing capacity and evaluates expansion plans for the upcoming quarters.

However, amidst this backdrop, we are seeing pockets of resilience Arctic, particularly in submarkets related to hybrid and electric vehicles.

Robert C. Daigle: Demand has been improving for consumables used for silicon carbide semiconductor production, and we continue to experience strong demand for high-end belt furnaces used to produce power semiconductor packaging materials and diffusion furnaces used for silicon and silicon carbide wafer production. While we await a rebound in demand in the broader markets, our organization is dedicated to optimizing every aspect of our operations to drive improved financial performance. In the first quarter, we continued our efforts to enhance our cost structure and streamline operations. Building on the $4 million in annualized cost savings discussed on our last call, we identified an additional $2 million in opportunities, which we implemented in the first quarter. The combination of these actions is expected to generate over $6 million in annualized savings starting in the second quarter of 2024 when compared to the same period last year.

The man has been improving for consumables used for silicon carbide semiconductor product production and we continue to experience strong demand for high end belt furnaces used to produce power semiconductor packaging materials and diffusion furnaces used for silicon and silicon carbide wafer production.

While we await for the rebound in demand in the broader markets. Our organization is dedicated to optimizing every aspect of our operations to drive improved financial performance.

In the first quarter, we continued our efforts to enhance our cost structure and streamline operations.

Building on the $4 million in annualized cost savings discussed on our last call, we identified an additional $2 million and opportunities, which we implemented in the first quarter.

The combination of these actions is expected to generate over $6 million in annualized savings starting in the second quarter of 2024, when compared to the same period last year.

Robert C. Daigle: Our primary objective continues to be aligning the organization's size with current market conditions to achieve near-term EBITDA profitability, while simultaneously positioning ourselves for significant operating leverage as market demand rebounds. Beyond these completed initiatives, we are actively exploring opportunities to optimize our manufacturing operations through strategic contract manufacturing partnerships. Our overarching goal is to focus our highly skilled workforce on the production of large, complex systems while streamlining the manufacturing of simpler components and assemblies through outsourcing.

Our primary objective continues to be aligning the organization size with current market conditions to achieve near term EBITDA profitability, while simultaneously positioning ourselves for significant operating leverage as market demand rebounds.

Beyond these completed initiatives, we are actively exploring opportunities to optimize our manufacturing operations through strategic contract manufacturing partnerships.

Our overarching goal is to focus our highly skilled workforce on production of large complex systems, while streamlining the manufacturing a simpler components and assemblies through outsourcing.

We believe this approach will enhance our overall flexibility and throughput while optimizing our fixed cost structure.

Robert C. Daigle: We believe this approach will enhance our overall flexibility and throughput while optimizing our fixed cost structure. For example, building on the positive results from the initial outsourcing initiatives, we plan to expand these efforts in the third quarter by relocating one of our manufacturing facilities in the U.S. to a smaller, more cost-effective facility. This strategic move is anticipated to reduce fixed expenses while, in some instances, enhancing our production capabilities. In addition to our restructuring activities, during the first quarter, we took additional actions to refine our pricing strategy. Despite inflationary conditions affecting input pricing over the last couple of years, we have not been as diligent in passing these increases on to our customers.

For example building on the positive results from the initial outsourcing initiatives, we plan to expand these efforts in the third quarter by relocating one of our manufacturing facilities in the U S to a smaller more cost effective facility.

This strategic move is anticipated to reduce fixed expenses, while preserving and in some instances enhancing our production capabilities.

In addition to our restructuring activities during the first quarter, we took additional actions to refine our pricing strategy.

Despite the inflationary conditions affecting input pricing over the last couple of years, we have not been as diligent passing these increases onto our customers.

Robert C. Daigle: With new objectives in place, we are seeing promising progress in quoting for new tools to ensure that pricing aligns more closely with current input costs. However, we do anticipate a lag before the full impact of these adjustments flows through as we work through the existing backlog. Shifting to the balance sheet, we are pleased to report a notable increase of $4 million in cash during the quarter. This increase primarily comes from our focused approach to managing work and capital, particularly in optimizing the timing of receivables and upfront payments. Looking ahead, we are committed to identifying additional opportunities, including inventory reduction, to further enhance the strength of our balance sheet. In closing, while Amtech stands out as a unique company with differentiated exposure to several rapidly growing markets, our current focus is on optimizing operations to increase profitability. Our performance in the first quarter highlights the increase and initial success of these efforts.

With new objectives in place, we are seeing product promising progress in quoting for new tools to ensure that pricing aligns more closely with current input costs.

We do anticipate a lag before the full impact of these adjustments flow through as we work through the existing backlog.

Shifting to the balance sheet. We are pleased to report a notable increase of $4 million in cash during the quarter.

This increase primarily comes from.

Our focused approach to managing working capital, particularly in optimizing the timing of receivables and upfront payments.

Looking ahead, we are committed to identifying additional opportunities, including inventory reduction to further enhance the strength of our balance sheet.

Okay.

In closing, while amtech stands out as a unique company with differentiated exposure to several rapidly growing market.

Our focus is on optimizing operations to increase profitability.

Our performance in the first quarter highlights the increase the initial success with these efforts with positive EBITDA and operating cash flow despite challenging market conditions.

Lisa Gibbs: positive EBITDA and operating cash flow despite challenging market conditions. Looking ahead, we are confident that the major investments in AI-related infrastructure and the investments that will be made to diversify global supply chains will result in strong demand for our back-end equipment. We also believe our consumables business and semiconductor manufacturing equipment will greatly benefit from strong growth in silicon carbide wafer production. As our markets recover, I'm confident that the strategic actions we're taking today to improve operational efficiency and reduce working capital will generate meaningful shareholder value. With that, I'll turn it over to Lisa for further details on the first quarter. Thank you, Bob.

Looking ahead, we are confident that the major investments in AI related infrastructure.

And the investments that will be made to diversify global supply chains will result in strong demand for our back end equipment.

We also believe our consumables business in semiconductor manufacturing equipment will greatly benefit from strong growth in silicon carbide wafer production.

As our markets recover I am confident that the strategic actions, we're taking today to improve operational efficiency and reduce working capital will generate meaningful shareholder value.

With that I'll turn it over to Lisa for further details on the first quarter.

Thank you Bob net.

Lisa Gibbs: Net revenues decreased 10% sequentially and increased 16% from the first quarter of fiscal 2023. The sequential decrease is primarily due to a decrease in equipment shipments across our business segment. As Bob mentioned, we are experiencing lower bookings in multiple areas of our business due to the softness in the semiconductor market. The increase from the prior year is primarily attributable to increases in our belt furnace shipments and the addition of entropics, partially offset by lower shipments of our reflow equipment. Gap gross margin increased sequentially due primarily to the intangible asset impairment charge of $4.6 million that was recorded in fiscal Q4 2023. However, compared to the prior year period, GAP gross margin decreased, primarily due to a less favorable product mix and an intangible asset impairment charge of $0.8 million recorded in Q1 2024.

Net revenues decreased 10% sequentially and increased 16% from the first quarter of fiscal 'twenty to 'twenty three the sequential.

Decrease is primarily due to a decrease in equipment shipments across our business segments.

As Bob mentioned, we are experiencing lower bookings in multiple areas of our business due to the softness in the semiconductor market.

The increase from prior year is primarily attributable to increases in our belt furnace shipments and the addition of <unk>, partially offset by lower shipments of our re flow equipment.

GAAP gross margin increased sequentially due primarily to the intangible asset impairment charge of $46 million that was recorded in fiscal Q4 2023.

Compared to the prior year period, GAAP gross margin decreased primarily due to a less favorable product mix and an intangible asset impairment charge of $8 million recorded in Q1 'twenty 'twenty four.

Lisa Gibbs: Non-GAAP gross margin increased sequentially due primarily to lower overhead expenses in a more favorable product mix. Non-GAAP gross margin in fiscal Q1 2024 was slightly lower compared to the same prior year period due primarily to a less favorable product net. Accounting guidance requires us to assess factors that could be considered a triggering event for impairment, and the material decline in our stock price below book value as of December 31, 2023 required us to perform this impairment assessment. Accordingly, we recorded a non-cash impairment charge totaling $7.6 million in our material and substrate segment, of which $0.8 million is recorded within gross profit, and the remainder is recorded within operating expenses.

non-GAAP gross margin increased sequentially due primarily to lower overhead expenses and a more favorable product mix non-GAAP gross margin in fiscal Q1, 2024 was slightly lower compared to the same prior year period, due primarily to a less favorable product mix.

Accounting guidance requires us to assess factors that could be considered a triggering event for impairment and the material decline in our stock price below book value as of December 31, 2023 required us to perform this impairment assessment.

Accordingly, we recorded a noncash impairment charge totaling $7 $6 million and our material substrate segment of which $8 million is recorded within gross profit and the remainder is recorded within operating expenses.

Lisa Gibbs: Selling General and Administrative Expenses, or SG&A, decreased $2.5 million on a sequential basis and decreased $0.6 million compared to the same prior year period. The sequential decrease is due to a number of expenses that were lower in Q1 2024, including intangible amortization, equity compensation, labor, consulting, and audit fees. Compared to the prior year, the decrease is due primarily to $1.4 million of lower acquisition expenses as well as lower consulting fees, partially offset by increased SG&A from the addition of Intrepid. Research, development, and engineering expenses decreased $1 million sequentially and increased $0.2 million compared to the same prior year period. The sequential decrease is associated with the reduction in investment in next-generation polishing tools at PR Hoffman that we referenced last quarter.

Selling general and administrative expenses or SG&A decreased $2 $5 million on a sequential basis and decreased <unk> $6 million compared to the same prior year period.

The sequential decrease is due to a number of expenses that were lower in Q1, 2024, including intangible amortization equity compensation labor consulting and audit fees.

Compared to the prior year. The decrease is due primarily to $1 $4 million as lower acquisition expenses as well as lower consulting fees, partially offset by added SG&A from the addition of in Capex.

Research development, and engineering expenses decreased $1 million sequentially and increased $2 million compared to the same prior year period.

The sequential decrease is associated with the reduction of investment in next generation pallet polishing tools at PR Hoffman that we referenced last quarter.

Lisa Gibbs: Gap operating loss was $8.9 million compared to gap operating loss of $11.7 million in the fourth quarter of fiscal 2023 and gap operating loss of $2.7 million in the same prior year period. Non-GAAP operating loss was $0.2 million compared to non-GAAP operating loss of $3 million in the fourth quarter of fiscal 2023 and non-GAAP operating loss of $2.7 million in the same prior year period. Gap's net loss for the first quarter of fiscal 2024 was $9.4 million, or $0.66 per share.

GAAP operating loss was $8 $9 million compared to GAAP operating loss of $11 $7 million in the fourth quarter of fiscal 2023, and GAAP operating loss of $2 $7 million in the same prior year period.

non-GAAP operating loss was <unk> $2 million compared to non-GAAP operating loss of $3 million in the fourth quarter of fiscal 2023, and non-GAAP operating loss of $2 $7 million in the same prior year period.

GAAP net loss for the first quarter of fiscal 2024 was $9 $4 million or <unk> 66 cents per share. This.

Lisa Gibbs: This compares to a gap net loss of $12 million or $0.85 per share for the preceding quarter and a gap net loss of $2.7 million or $0.20 per share for the first quarter of fiscal 2023. Non-GAAP net loss for the first quarter of fiscal 2024 was $0.6 million or 4 cents per share. This compares to a non-GAAP net loss of $2.5 million, or $0.18 per share, for the preceding quarter and a non-GAAP net loss of $0.7 million, or $0.05 per share, for the first quarter of fiscal 2023. Unrestricted cash and cash equivalents at December 31, 2023 were $17 million compared to $13.1 million at September 30, 2023. Approximately 80% of our cash balance as of December 31, 2023 will be held in the United States.

This compares to GAAP net loss of $12 million or <unk> 85 cents per share for the preceding quarter and GAAP net loss of $2 $7 million or <unk> 20 per share for the first quarter of fiscal 2023.

non-GAAP net loss for the first quarter of fiscal 2024 was point $6 million or four cents per share.

This compares to non-GAAP net loss of $2.5 million or <unk> 18 cents per share for the preceding quarter and non-GAAP net loss of <unk> $7 million or five cents per share for the first quarter of fiscal 2023.

Unrestricted cash and cash equivalents at December 31, 2023 were $17 million compared to $13 $1 million.

<unk> 2023.

Approximately 80% of our cash balance as of December 31, 2023 is held in the United States.

Lisa Gibbs: As Bob mentioned, we continue to focus on managing our working capital, and we had very strong collections during this December quarter. In terms of our debt, as a reminder, we changed the structure of our debt in December, and a portion of our term loan was moved over to our revolver, and our maximum borrowing capacity on the revolver was raised to $14 million. The amount that was transferred from our term loan to the revolver was $5.6 million, leaving a term loan balance of $4.4 million. In January, we paid $2 million towards the revolver, leaving us with an approximate balance of $3.6 million. To date, other than the balance transfer, we have not borrowed against the revolver.

As Bob mentioned, we continue to focus on managing our working capital and we had a very strong collect had very strong collections during the December quarter.

In terms of our debt as a reminder, we changed the structure of our debt in December and a portion of our term loan was moved over to our revolver and our maximum borrowing capacity on the revolver was raised to $14 million.

The amount that was transferred from our term loan to the revolver was $5 $6 million, leaving a term loan balance of $4 $4 million.

In January we paid $2 million towards the revolver, leaving us with an approximate balance of $3 $6 million.

Two to date other than the balance transfer we have not borrowed against our revolver.

Lisa Gibbs: We continue to closely monitor our working capital and liquidity and will evaluate the balance on our revolver and our cash needs in an effort to minimize interest expense. Our working capital needs may vary as we execute on our backlog of $50 million, and with BTU's move to their smaller facility this summer, we will have capital expenditures in the coming months. Now turning to our outlook, for the second fiscal quarter ending March 31, 2024, we expect revenues in the range of $22 to $25 million, with EBITDA nominally negative to neutral.

We continue to closely monitor our working capital and liquidity and will evaluate the balance on our revolver and our cash needs in an effort to minimize interest expense.

Our working capital needs may vary as we execute on our backlog of $50 million and with B G. B to use move to their smaller facility. This summer we will have capital expenditures in the coming months.

Now turning to our outlook for the second fiscal quarter ending March 31, 2024, we expect revenues in the range of $22 million to $25 million with EBITDA nominally negative to neutral.

Although the near term outlook for revenue and earnings remains challenging we remain confident that the future prospects are strong for both our consumables and equipment, serving advanced mobility and advanced packaging applications.

Operator: Although the near-term outlook for revenue and earnings remains challenging, we remain confident that the future prospects are strong for both our consumables and equipment serving advanced mobility and advanced packaging applications. We took actions during the first quarter of fiscal 2024, which will reduce Amtech's structural costs by approximately $6 million annually and better align product pricing with value. These steps should significantly improve results and enhance profitability through market cycles. However, operating results can be significantly impacted, positively or negatively, by the timing of orders, system shipments, logistical challenges, and the financial results of semiconductor manufacturers. Additionally, the semiconductor equipment industries can be cyclical and inherently impacted by changes in market demand. Therefore, actual results may differ materially in the weeks and months ahead. A portion of Amtech's results is denominated in RMB, a Chinese currency. The outlook provided is based on an assumed exchange rate between the United States dollar and the RMB. Changes in the value of the RMB in relation to the United States dollar could cause actual results to differ from expectations. I will now turn the call over to the operator for questions. Operator?

Took actions during the first quarter of fiscal 2024, which will reduce amtech structural cost by approximately $6 million annually and better align product pricing with value.

These steps should significantly improve results and enhance profitability through market cycles.

Operating results can be significantly impacted positively or negatively by the timing of orders system shipments logistical challenges and the financial results of semiconductor manufacturers.

Additionally, the semiconductor semiconductor equipment industries can be cyclical and inherently impacted by changes in market demand actual results may differ materially and the weeks and months ahead.

A portion of Ametek's results is denominated in RMB is a Chinese currency. The outlook provided is based on an assumed exchange rate between the United States dollar and the RMB changes in the value of the RMB in relation to the United States dollar could cause actual results to differ from expectations.

I will now turn the call over to the operator for questions operator.

Yeah.

Operator: www.amtechs.com Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question area. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star 2.

Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question you May press star two if you'd like to remove your question from Nikhil for participants using speaker equipment. It may be nessus.

Sorry to pick up your handset before pressing the star Keys. Our first question comes from the line of Craig Irwin with Roth M. Kam. Please proceed with your question.

Craig Irwin: Our first question comes from the line of Craig Irwin with Roth MKM. Please proceed with your question. Good morning, and thanks for taking my questions.

Hi, good morning, and thanks for taking my questions first I'd like to say congratulations on the positive execution in a difficult environment I know that really takes a lot. Some not only just leadership with the rest of the employees.

Craig Irwin: First, I'd like to congratulate you on the positive execution in a difficult environment. I know that really takes a lot from not only just leadership but the rest of the employees. My question is this, right?

Thank you.

My question is this right your backlog.

Craig Irwin: Your backlog... very strong if we look at the long-term history for Amtech Systems. It's a healthy book of business with a number of substantial customers, and it's diversified across markets that are driving things and product lines that you offer. Um, can you maybe highlight for us, um, not the backlog, um, but the, um, pipeline, right? As you look out there, you know, I can see several, um... Silicon Carbide fabs that are on the drawing boards right now. There are also many other power semiconductor fabs out there and things in the more sort of typical main lines, semis industry, that are slated for construction probably over the next few years.

It was very strong if we look at the long term history.

Tech systems right.

You know healthy book of business.

With a number of substantial customers, it's diversified across markets that are driving things and product lines that you offer.

Can you maybe highlight for us.

Not the backlog, let's see.

The pipeline right as you look out there you know I can see several.

Silicon carbide Fabs that are that are on the drawing boards right now theyre.

There are also many other power semiconductor fabs out there and things and the more sort of typical mainline Chinese industry that are slated for construction probably over the next many years.

Robert C. Daigle: But how would you characterize the broader book of potential business over the next number of years versus where you've sat, you know, at different points in the cycle over the last few years? Yeah, yeah, I think, Craig, let me, let me, talk through the different parts of the business, because I absolutely agree with you that there are some very strong tailwinds, especially in regards to, I'd say, the broader power electronics business Even with all the news these days about a little bit of a slowdown, a little bit of a back off in the EV market, there's still very strong growth projections, and there's still an awful lot of investment going into the silicon carbide area. But more broadly than that, the shift more recently from, I think, a lot more emphasis on hybrid electric vehicles is also a very positive secular tailwind for power electronics, And If you look at the current backlog, a lot of it is really in the power semiconductor packaging area and, in some cases, the actual wafer production for both IGBTs and silicon carbide.

How would you characterize the bill.

Broader a broader book of potential business over the next number of years versus where you've shot.

One points in the cycle it will grow.

Over the last few years.

Yes, Yes, I think yes, correct, let me let me.

Talk through the different parts of the business because I absolutely agree with you that.

There's some very strong tailwind, especially in regards to <unk>.

Say the broader powerless.

Our electronics business and even <unk>.

Even with.

You know all the news these days about a little bit of a slowdown backing off a little bit on the EV market is still very strong growth projections and theres still an awful lot of investment going into the silicon carbide area, but more broadly than that.

The shifts more recently from I think a lot more emphasis on hybrid electric vehicles is also very positive secular tailwind for power electronics business.

And a lot of our backlog is really in relation to that if you look at current backlog a lot of it is really in the power semiconductor packaging area.

And in some cases, the actual wafer production for both <unk> and Silicon carbide.

Robert C. Daigle: What I would expect to happen, you know, and as I mentioned in our comments, we're starting to see, you know, I think there was some digestion of some inventory even in the power electronics area. We're starting to see some rebounds in the consumables market. I would expect that to continue. And I would expect that some of the...

Well, what I would expect to happen and as I mentioned during in our comments, we're starting to see.

I think there was some digestion of of some inventory even in the power electronics area, we're starting to see some rebounds in the consumables market area.

I'd expect that to continue.

And I would expect that some of the.

Okay.

Robert C. Daigle: I expect to see more activity in regards to silicon carbide manufacturing capital equipment in the coming year or two as these fabs continue to expand. And at some point, we'll see a recovery on the back end. That's probably been the, I mean, the softest part of our business has really been, you know, in the back end, the surface mount assembly, and even in the advanced packaging area of our business has really slowed significantly, but we would expect that to rebound nicely as the industry digests the existing capacity. So, you know, again, over the next year or two for the business, it's easy to point to some very strong..., tailwinds Okay, understood. So, the $6 million in savings that you achieved this past, you know, few months.

More activity in regards to silicon carbide manufacturing.

Capital equipment in the coming as we look out in the next year or two as these fabs continue to expand.

And at some point, we will see a recovery in the backend.

That's probably been the I mean, that's been the softest part of our business has really been listen.

Back in the surface Mount Assembly.

And even in the advanced packaging area of our business is really.

Slowed significantly, but we would expect.

That to rebound nicely.

As the industry digests the existing capacity.

So you know again over the next it's easy to point to some very strong <unk>.

<unk> in the next year or two for the business.

Predict exactly.

Which core.

Do we start to see that heavy activity on a quarterly basis.

Okay understood. So the $6 million in savings that you achieved this.

This past.

Few months.

Lisa Gibbs: Can you maybe help us understand how that materializes on the P&L rapidly over time, right? Will that all be achieved by the end of this quarter? Or does it potentially lag into the next quarter, given the way the changes were made? And, you know, if...

Can you maybe help.

Help us understand how that materializes on the P&L rabidly over time right will that all be achieved by the end of this quarter.

Or does it potentially lag into the next quarter given the way the changes were made and you know it.

Craig Irwin: If you were to see a positive uptick in demand from what you're anticipating now, does this crimp in any way your ability to serve them, or does your restructuring just make you more profitable and better positioned to serve your market? Sure, Craig. I'll take that first part. You know, I would say the $4 million annualized we should see in the full quarter here.

If you were to see a.

A positive uptick in demand.

From what Youre anticipating now.

Does this in any way your ability to serve that demand or does your restructuring just make you a more profitable and better positioned to serve the markets.

Sure Craig I'll I'll take that first part.

But I would say that 4 million of annualized we should see and in the full quarter here. The additional two has a bit of a lag.

Lisa Gibbs: The additional two have a bit of a lag, but not a lot. But definitely by, you know, fiscal Q2, we should see the full impact of that savings. I'll let Bob answer the other part of that. Yeah, And to your question, Craig, about whether we have done anything that, you know, would create issues as the market rebounds, no, that's an area. We've been very careful about that in making sure that we maintain the capability to scale. And part of that is really more of a strategic move, to get some strategic partners in place for some of the contract manufacturing by reducing some of the fixed costs we really haven't... because we've aligned with partners, which will help us scale and grow in a more cost-effective way than we have in the past. So again, I think we're ready for the rebound whenever it comes, and I don't think any of the actions we've taken really jeopardize any of that.

But not a lot but definitely by.

You know the fiscal Q2, we should see the full impact of that savings.

I'll, let Bob answer the other part of that.

And to your question Craig about have we have we done anything that.

With trade issues as the market rebounds, now that's an area we've been very careful about that and making sure that we maintain.

Capability to scale and in part of that is really more of a strategic move.

To.

Get some strategic partners in place for some of the contract manufacturing.

By reducing some of the fixed costs, we really haven't.

Jeopardize growth because we've we've aligned with partners, which will help us scale and scale in a more cost effective way.

Then we have in the past.

So again I think we're ready for the rebound whenever it comes and I don't think.

Of the actions, we've taken really jeopardize any of that.

Craig Irwin: Excellent. Last question, if I may, congrats on the positive cash movement and quarter, right? I know that also takes some significant discipline.

Excellent last question, if I may congrats.

Congrats on the positive cash movement in the quarter right I know that also takes some significant discipline.

Yeah.

Craig Irwin: Do you see potential for further gains over the next number of months? Is there a potential need for working capital cash? Are there any other adjustments to the balance sheet? I mean, you paid off your debt, right?

Do you see potential for further gains over the next number of months.

Is there a potential need for working capital cash.

And you know.

Is there is there any any other adjustments to the balance sheet. I mean, you did your debt right. Your debt is now in a much more secure position, but is there any other adjustments to balance sheet that you would maybe want to highlight.

Lisa Gibbs: Your debt is now in a much more secure position, but are there any other adjustments to the balance sheet that you would maybe wanna highlight? It was a, you know, the team worked really hard this quarter on collections and managing working capital. And I think it will continue to kind of fluctuate. You know, we've got this backlog to work down, as well as, you know, we're moving BTU into a smaller building in Massachusetts over the summer. So there will be some CapEx expenditures over the next couple of quarters. I think it will fluctuate, but we'll continue a very strong focus on working capital. As Bob mentioned, our partners will be working with them to see where we can leverage their buying power and, you know, let them consume some working capital instead of our, you know, our balance sheet. So it will fluctuate a little bit, but we'll continue to have a very strong focus on it, you know, going forward. Thank you so much.

Oh It was a the team worked really hard this quarter on collections and managing working capital and I think it will continue to kind of fluctuate.

We've got.

This backlog to work down.

As well as you know, we're moving btu into a in Massachusetts into a smaller building over the summer there will be some capex expenditures over the next couple of quarters I think it will fluctuate.

But we'll continue to have very strong focus on working capital.

Bob mentioned, our partners will be working with them to see.

Where we can leverage their buying power and.

Let them consume some working capital instead of R. R.

Our balance sheet. So it will fluctuate a little bit, but we'll continue to have a very strong focus on it.

So going forward.

Craig Irwin: Hey, thanks for taking my questions and good luck. Thank you, Craig. Thank you. Once again, as a reminder, if you'd like to join the question queue, it's star one on your telephone. Our next question comes from the line of Mark Miller with the Benchmark Company.

Thank you so much hey, thanks for taking my questions and.

Good luck thank.

Thank you Craig.

Yes.

Thank you once again as a reminder, if you'd like to join the question queue. Its star one on your telephone keypad.

Our next question comes from the line of Mark Miller with the Benchmark Company. Please proceed with your question.

Mark S. Miller: Please proceed with your question. Thank you for the question and congratulations on your progress in reducing costs. I was just wondering where you are at right now with relation to some of your financial covenants with your lenders? So we revised those covenants with our lender. It's a quarterly EBITDA covenant, and we were in compliance with that, well in excess of compliance with that covenant this quarter. You mentioned you were implementing a pricing strategy and trying to pass along some increases you've seen. How's that? Could you give a little more color on that? Yeah,

Thank you for the question and congratulations on your progress.

<unk> cost.

Just wondering where we're where are you at right now with relation to some of your financial covenants with your lender.

So we.

Revise those covenants with our lender, it's a quarterly EBITDA covenant and we were in compliance with that well in excess of compliance with that covenant this quarter.

You mentioned you were you were implementing our pricing strategy and trying to pass along some increases you've seen how how exactly could you give a little more color on that.

Yeah.

Lisa Gibbs: Talk a little bit more about that, Mark. Yeah, and as I mentioned in the commentary, I think part of what was happening was we were seeing a little bit of margin pressure because input costs were rising, and we really weren't adjusting pricing accordingly. We've changed that, and we've updated our pricing, our models, and how we approach the market. And frankly, that's been. That's been received okay. I mean, customers are never happy about price increases, but in this case, I think it was expected, and we just lagged a little bit, I think, behind where we might have otherwise been, but we've done pretty well with those actions. And again, we have some backlog, which we'll be working through, so it's not all immediate. But as we build out our backlog and replace backlog, it's going to come in at a better margin.

Talk a little bit more about that Marc yeah, and as I mentioned in the commentary I think part of part of what was happening is we were seeing a little bit of margin pressure because input costs were rising and we really werent adjusting pricing accordingly.

We've changed that and we've updated our pricing our models and how we approach the market and frankly that's been.

That's that's been received okay. I mean customers are never happy about.

This increases but in this case I think.

It was expected and we just lagged a little bit I think behind where we might have otherwise been but it's.

We've done pretty well with those actions and again, we've got we have some backlog, which will be working through so it's not all immediate.

But as we build.

Build out our backlog and replace backlog, it's going to come in at a better margin.

Robert C. Daigle: Thank you, www.amtech.com. Thank you. Ladies and gentlemen, I see no other questions at this time. I'll turn the floor back to Mr. Daigle for any final questions. Alright, thank you, thank you. Thank you again for joining our conference call, and I look forward to updating you on our progress in the months to come. Have a good day, everyone. Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Okay. Thank you.

Okay.

Thank you, ladies and gentlemen, I see no other questions at this time.

I'll turn the floor back to Mr. <unk> for any final comments.

Alright. Thank you. Thank you.

Thank you again for joining our conference call and I look forward to updating you on our progress in the months to come.

Good day everyone.

Yeah.

Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.