Q4 2024 Amtech Systems Inc Earnings Call

Selling general and administrative expenses increased by approximately $6 million on a sequential basis and decreased $2 3 million compared to the fourth quarter of 'twenty to 'twenty three.

The sequential increase is due primarily to increased consulting audit and it expenses.

Compared to the same prior year quarter. The decrease is driven by the point 5 million intangible asset impairment charge and lower labor and labor related expenses as a result of our cost reduction initiatives.

Well as lower shipping on expenses and lower revenues.

Research and development and engineering expenses increased by <unk> 3 million sequentially and decreased $1 6 million compared to the prior year fourth quarter.

But the sequential decrease due primarily to the timing of purchases related to specific projects in both segments.

The decrease from prior year fourth quarter was attributable to development efforts and I sit in our semiconductor fabrication solutions segment that did not reoccur.

GAAP net loss for the fourth quarter of fiscal 2020 four was <unk> 5 million or four cents per share. This compares to GAAP net income of 4 million or three cents per share for the preceding quarter and a GAAP net loss of 12 million or <unk> 85 cents per share for the fourth quarter of <unk>.

Fiscal 2023.

non-GAAP net loss for the fourth quarter of fiscal 2024, it was $7000 or zero cents per share. This compares to non-GAAP.

Net income of $1 1 million or <unk> <unk> per share for the preceding quarter and non-GAAP net loss of $2 5 million or 18 cents per share for the fourth quarter of fiscal 2023.

Okay.

For cash unrestricted unrestricted cash and cash equivalent.

At September 30 is 2024 were $11 1 million compared to $13 1 million.

At September 30 of 2023 debt payments during the three months ended or 4 million, which included the final payment of our term loan and revolving credit facility.

Net cash as of September 30th 'twenty 'twenty four it was $10 8 million compared to $2 4 million as of September 32023.

Now turning to our outlook.

For the first fiscal quarter ending December 31, 2024, we expect revenues in the range of $21 million to $24 million with adjusted EBITDA nominally neutral the near term outlook for revenue and earnings remains challenging the actions we took in fiscal 'twenty 'twenty four will reduce <unk>.

Tech structural costs by approximately $7 million annually.

Also by mid next fiscal year, we expect to realize an additional $2 million in operational savings from our outsourcing to contract manufacturing.

We are focused on optimizing our operations and delivering positive operating cash flows across all our segments, even amid a prolonged secular downturn.

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

Additionally, the 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 Ametek's results is denominated in RMB. They 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 in relation to the United States dollar could cause actual results to differ from expectations.

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

Speaker Change: 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.

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Speaker Change: Your first question comes from the line of Craig Irwin from Roth Capital Partners. Your line is now open.

Craig Irwin: Hi, good evening and thank you for taking my questions.

Craig Irwin: First I should say congratulations on the on the really good execution.

Craig Irwin: Bringing down costs.

Craig Irwin: Tightening everything up in this image environment, we're all operating through so.

Speaker Change: Great execution there.

Craig Irwin: Thank you Craig.

Speaker Change: My question is this and it's it's a little bit high level, but.

Speaker Change: You're renaming your segments right and that speaks for our refreshed and renewed strategic focus can you maybe call out some of the applications are opportunities, where you think amtech can participate in sort of AI and data center growth.

Speaker Change: You know electricity demand growth over the next several years you know what do you see as relatively fresh products that you have to offer into this market and.

Speaker Change: How do you expect this to take shape as far as visibility for the investment community.

Speaker Change: Alright, great great great.

Speaker Change: Yeah. So let me let me start again at the high level. There were a couple of reasons for for really revisiting our segment definitions and some of it was.

Speaker Change: Just to be to be Frank I thought it was a little bit confusing I think some of what we referred to as the semiconductor segment goes back to the days, where amtech was heavily vault with solar so it was either solar business or semi and and when I looking at the portfolio a lot of what you know what.

Speaker Change: Look when I look at our business, we really have the semiconductor front end of our business, which is really involved in in actual semiconductor device fabrication, which is again what will be and.

Speaker Change: And it's broader than just materials and substrates a lot of what we do there are as you know.

Involves services and parts for that.

Speaker Change: Part of the business.

Speaker Change: And then what we've been referring to as the semiconductor segment, it's really backend packaging and assembly of the electronics. So again it was trying to clean this up and get clearer definition about you know we have the front end of our business which is.

Speaker Change: Semi fab related and then we have the backend, which is packaging and assembly and trying to get some clarity around that now then back to the strategic question of where do we grow.

Speaker Change: You know, obviously AI everybody has been targeting a EIS as a growth driver for their business, where we're no different we play there we have been playing there.

Speaker Change: Primarily on the back end are our re flow equipment. For example is used.

Speaker Change: Extensively in terms of the advanced packaging applications for for semiconductor production.

Speaker Change: We are also looking however at opportunities that are adjacent.

Speaker Change: That would relate a little bit it's more on the consumable side, where we are working in its early stage with some customers that have some unique solutions for our packaging and in particular thermal management, which has been.

Speaker Change: A lot about in terms of the challenges with these.

Speaker Change: The more advanced AI chips, how much heat they're generating.

Speaker Change: We are involved in have been.

Speaker Change: Involved in are consumed with consumables at the front end with with one of our customers. That's that's heavily focused on trying to solve those problems. So I see that as an opportunity really to broaden what we're doing in an area. They are beyond just the.

Speaker Change: Backend equipment, but also in the consumables area, but stepping back even further from that.

Speaker Change: I see I.

Speaker Change: I see the consumables parts and service business, which which as we noted in this in the call.

Speaker Change: Even even with a very challenging.

Industry dynamics, we did see growth, we were able to grow our consumables parts and service business, although less than we would have obviously liked.

Speaker Change: We did see growth <unk>.

Speaker Change: All of our decline more than all our decline was driven by weakness in the equipment sector. So.

Speaker Change: So when I look when I look ahead, what I want to see us as is transform amtech into a much more of a a consumables.

Consumables parts and service business.

Speaker Change: Not that you know.

Speaker Change: Equipment area, especially AI related are very much of interest, but I do see those areas as driving our margins up.

Speaker Change: And driving growth opportunities and as we mentioned in the script that that's really where we're investing where we've brought on we're bringing talent on board.

Speaker Change: I'll characterize you know we were very very fragmented and what we're now calling our semiconductor fabrication solutions.

Speaker Change: We were really managing those three tiny businesses and they're now under single leadership.

With shared commercial resources and marketing and sales we will also share in the areas of Yelp for product development as we move forward. So I see the investments in those areas, where frankly, we've been pretty passes but I think there's plenty of opportunity I believe for.

Speaker Change: Us too.

Speaker Change: Proactively grow that part of the business. It will not only I think improve our margins drive growth, but will also reduce the cyclicality that is inherent to any of these are you know any business. That's that's heavily reliant on equipment sales.

Speaker Change: Don't know if that answered your question, Craig or if you'd like me to elaborate on anything because I'd call. It.

Speaker Change: It goes a long way to answering the question that actually starts to step into the secondary I really wanted to ask you about so many of us falling amtech. After the last number of years have been quite excited about the participation.

Speaker Change: And the silicon carbide industry see emerging power semiconductor technology. It can be transformational char economy, not just in electric vehicles, but in industrial equipment military equipment, all sorts of things.

Speaker Change: And.

Speaker Change: It appeared that that amtech was particularly well positioned on the consumable side.

Speaker Change: Serve and.

Speaker Change: Our niche in sort of.

Speaker Change: Consumables peripheral wafer production.

Can you maybe share with US you know your growth.

Speaker Change: In the consumables business did you see absolute growth in cassettes and other materials supplied into the silicon carbide industry that industry is going through a cyclical readjustment as you pointed out yeah. It seems there is absolute growth going on are you seeing more growth in things like cassettes for eight inch wafers and six inch wafers.

Speaker Change: Can you just talk about where we are the green shoots are in in that industry.

Speaker Change: Yeah. So we again, yeah, we've participated pretty broadly in and continue to do so in silicon carbide wafer production with with our consumables at a pure Hoffman and as as I mentioned, we saw very substantial year over year growth in that PR Hoffman part of the.

Speaker Change: Part of the business.

Speaker Change: 28% actually year over year in the consumables out of PR Hoffman.

Speaker Change: A lot of that was related to silicon carbide. So.

Speaker Change: You know again, I think I think the the luster and EV has has.

Speaker Change: <unk> a bit and there's been some inventory corrections going on so.

Speaker Change: At least and this is this is purely opinion, Craig but I.

Speaker Change: I do believe.

Speaker Change: Where people were expecting 30, 40%.

Speaker Change: Market growth EV related we're likely to see something that's more in the let's say normalized 15, 20% still very substantial growth, but I think I think the wildcard in all of this is.

Speaker Change: There's been so much.

Speaker Change: Investment in Silicon carbide globally, and it's continuing especially in mainland China that there is a lot of effort right now frankly in expanding the application base for silicon carbide.

Speaker Change: So I think the expectations for silicon carbide growth, where maybe people were saying 30, 40% tied directly to EV have been somewhat tempered.

Speaker Change: So sure we're not going to see.

Speaker Change: Growth rates.

Speaker Change: That approach those levels with the combination of what was going to be EV and these other application areas that everybody is focused on four are expanding their base. So I'm still very optimistic frankly around the EV or the silicon carbide growth driver for us we participate broadly it's.

Speaker Change: It's a very attractive market application area.

Speaker Change: The enthusiasm is tempered around EV, but that mean that that I think we will get offset at least to some degree by other applications.

Speaker Change: Understood well. Thank you for taking my questions I'll go ahead and hop back in the queue.

Craig Irwin: Great. Thank you Craig.

Speaker Change: Once again, if you have any questions. Please press star one on your telephone keypad.

Your next question comes from the line of Mark Miller from the Benchmark Company. Your line is now open.

I'd like to add my congratulations to the management of the cost management and your expectations for more cost reductions next year.

Speaker Change: I was just thinking there are just trying to understand.

Speaker Change: Your cash went down 2 million last quarter, what is your outlook for cash flow generation over the next six months.

Speaker Change: Yes.

Speaker Change: Yes, I can take that so our cash flow generation will be partially fueled by our operation activities as we've reduced inventory.

Speaker Change: And then of course, our positive EBITDA in the future quarters, just just no no mark we paid off what was the number we paid off around formula Yeah. So the reason the cash went down as we we've paid off the rest of our debt right. We wanted to be debt free so we basically P.

Speaker Change: Aid off $4 million and we're done we're done.

No more debt right now.

Speaker Change: So there's no more covenants or anything you have to worry about because you paid off your term loan and revolver, yeah, and and frankly, you know again that was our focus right get the operations to be cash flow positive even during the downturn be aggressive on working capital get rid of the debt.

Speaker Change: Again, we control.

Speaker Change: Big believer, we're going to control our own destiny on costs, we're going to control our own destiny in the medium long term by our growth initiatives that don't just.

Speaker Change: And not just be relying on market recovery, but look at expanding our business.

Speaker Change: And then also obviously it'll be nice it'll be nice when the market actually does recover which it will I just don't know when that will be.

Speaker Change: Your your mergers ticked up you were saying there was mix I'm, just wondering margin outwork. It ticked off which is the highest of the year for the fourth quarter I'm, just wondering what youre thinking about in terms of margin outlook.

Yeah sure. Thank you so for our margin outlook.

Speaker Change: Given the guidance for Q1 coming into fiscal year 2025 is going to be slight.

Speaker Change: Slightly close I'm, just under that Q4 performance.

Speaker Change: Given what we're shipping out that quarter.

Speaker Change: But going in after that we expect to be right in that range of 40%.

Speaker Change: Yeah. So a lot of a lot of the restructuring we did mark was really aimed at that rate is at at similar similar volume revenue numbers similar mix.

Speaker Change: Being in that Fortyish or better and then hopefully with again revenue should help that right.

Speaker Change: <unk> and more volume comes in we will get more operating leverage.

Speaker Change: Eat into some of that overhead at that cost of goods solid level.

Speaker Change: We'll be able to enhance our.

Speaker Change: Margins.

Speaker Change: In terms of I havent heard of that.

Speaker Change: Oh, sorry, part of that contract manufacturing.

Speaker Change: <unk> put in place will help yield even more results in the future. Okay already kicked up last quarter do you expect that to come back down to third quarter for in terms of average for 2025.

Speaker Change: It was that Dino R&D. This this quote was up a little bit it was a little bit offset from last quarter honestly some of our R&D costs pushed out.

Speaker Change: Into Q4 from the Q3.

Speaker Change: So we're gonna go pretty much back to our normal run rate if you average the two quarters.

Speaker Change: Can you tell me what that is please.

Speaker Change: Okay.

Speaker Change:

Speaker Change: We should be right around.

Speaker Change: For the quarter.

Okay.

Speaker Change: Alright. Thank you. Thank you Youre welcome.

Speaker Change: Thanks Mark.

Speaker Change: There are no further questions at this time I will now turn the call back to Bob Daigle. Please continue.

Bob Daigle: Alright, well. Thanks, Thank you for joining our conference call today, and I'm looking forward to updating everybody on the progress we're making in the months to come. Thank you.

Bob Daigle: And have a good evening.

Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

Speaker Change: Yes.

Speaker Change: Yeah.