Q3 2025 Amtech Systems Inc Earnings Call

Speaker #3: Good day and welcome to the AMTECH SYSTEMS INC Q4 2025 earnings call. Please note that this call is being recorded and simultaneously webcast. I would now like to turn the call over to Erica Mannion of Sapphire Invest Relations.

Speaker #3: Please go ahead.

Speaker #4: Good afternoon and thank you for joining us for AMTECH SYSTEMS' third, fiscal third quarter 2025 conference call. With me today on the call are Bob Daigle, Chairman and Chief Executive Officer, and Wade Jenke, Chief Financial Officer.

Speaker #4: After close of market today, AMTECH released its financial results for the third fiscal quarter of 2025. The earnings release is posted on the company's website, at www.amtechsystems.com, in the Investors section.

Speaker #4: Before we begin, I'd like to remind everyone that the Safe Harbor disclaimer in our public filings covers this call and the webcast. Some of the comments to be made during today's call will contain forward-looking statements and assumptions that are subject to risk and uncertainties.

Speaker #4: Including, but not limited to, those contained in our SEC filings, all of which are posted in the Investors section of our corporate website. The company assumes no obligation to update any such forward-looking statements.

Speaker #4: You are cautioned not to place under 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 materially from current expectations.

Speaker #4: Among the important factors which could cause actual results to differ materially from those in the forward-looking statements are changes in technologies used by customers and competitors, change in volatility in the demand for products, the effect of changing worldwide political and economic conditions, including trade sanctions, the effect of overall market conditions, including equity and credit markets, and market acceptance risk, ongoing logistics, supply chain, and labor challenges, and capital allocation plans.

Speaker #4: Other risk factors are ailed 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 third fiscal quarter.

Speaker #4: Financial results. You'll find a reconciliation of these non-GAAP measures to our actual GAAP results included in the press release issued today. I will now turn the call over to AMTECH's Chief Executive Officer, Bob Daigle.

Speaker #5: Good afternoon and thank you for joining us today. I'm pleased to report that our third quarter performance was above expectations, with revenue of $19.6 million and an rease of 26% over the prior quarter.

Speaker #5: Both our thermal processing solutions and our semiconductor fabrication solutions segments exceeded forecasts reflecting ongoing strength in the advanced packaging market and stabilizing demand within the mature node semiconductor market.

Speaker #5: Adjusted EBITDA was also came in above expectations at $2.2 million benefiting a non-reoccurring employee retention credit. Excluding those items, EBITDA was nominally positive. This profitability reflects the combination of improved cost controls, operational discipline, as well as benefits of our transition to a more flexible asset-like manufacturing model.

Speaker #5: Expanding on our end markets, with the thermal processing solution segment, advanced semiconductor packaging remained a highlight this quarter, with continued strength driven primarily by ongoing investments in AI infrastructure.

Speaker #5: For context, in the third quarter, revenue from AI, equipment, used revenue from equipment used for AI infrastructure increased fivefold from a year ago and over 60% sequentially.

Speaker #5: AI-related equipment accounted for about 25% of our thermal processing solutions revenue in the quarter. Related to revenue mix, we generated about 60% of our revenue from capital equipment and 40% from reoccurring revenue, including consumables, parts, and services.

Speaker #5: The balance between capital equipment and reoccurring revenue is important and reflects our strategy to expand reoccurring revenue streams while fully capitalizing on opportunities for equipment used to expand AI infrastructure.

Speaker #5: As we look ahead, our third quarter bookings suggest we should continue to see strength for AI-related equipment revenue. To fully capitalize on this opportunity, for growth, we are continuing to invest in next-generation semiconductor packaging equipment that enables volume production of higher density advanced packages to increase our addressable market and the value we provide to customers.

Speaker #5: Turning to our semiconductor fabrication solution segment, as we indicated last quarter, demand for front-end equipment and consumables tied to mature node semiconductor applications in industrial and automotive markets remained weak.

Speaker #5: That said, performance in this segment modestly exceeded our ectations in the quarter, driven by some improvements in demand for consumables. Beyond the cyclical ebbs and flows of this market, we remain committed to olling our own destiny.

Speaker #5: By investing in applications and product development to solve problems faced by our ustomers. We expect these initiatives to deepen customer relationships and increase reoccurring revenue streams as customers qualify our products and scale production.

Speaker #5: While these initiatives will take time to scale, we believe they're important to generate steady growth and building a more resilient, higher-margin business. Beyond our AI equipment and reoccurring revenue growth initiatives, we have made significant progress in optimizing our operating model.

Speaker #5: Over the past 18 months, we've implemented a series of cost reduction initiatives resulting in $13 million in annualized savings. This includes consolidating our manufacturing footprint from seven sites to four sites as we shifted some of our production to outsourced partners.

Speaker #5: Looking ahead, we expect to realize additional savings by subletting unutilized facilities. These actions will further lower our EBITDA break-even point and improve our ability to scale profitability with higher volumes.

Speaker #5: In summary, while the near-term environment remains dynamic with strong AI-related demand, but weak mature node product demand, we believe the structural changes we've made to improve operating leverage and our focused investments in product and application development position us very well to deliver profitable growth.

Speaker #5: With that, I'll turn it to Wade for further details on our financial results.

Speaker #6: Thank ou, Bob. For the fiscal third quarter, of 2025, net revenues rose 26% sequentially, to $19.6 million. Driven primarily by strong demand in Asia for reflow ovens used in AI applications.

Speaker #6: Revenues were down 27% compared to the same prior period last year. Largely due to continued weakness in the mature node semiconductor market. Which led to lower sales of wafer cleaning equipment, diffusion, systems, and high-temperature furnaces.

Speaker #6: This decline was partially offset by the increased sales of advanced packaging solutions. In the fiscal third quarter of 2025, our payroll tax expenses were reduced by the receipt of an employer retention credit in the amount of $2.1 million.

Speaker #6: GAAP gross margin increased by 9.5 million sequentially from the prior quarter. Primarily due to the absence of $6 million in non-cash inventory write-downs recorded last quarter.

Speaker #6: Compared to the same period last year, gross margin decreased by 0.6 million, driven by lower sales volume resulting from continued weak demand in the mature node semiconductor market.

Speaker #6: This quarter's gross margin benefited from a $1 million employer retention credit refund excluding this ERC normalized gross margin was 41.5%, a solid improvement from 36.5% in the third quarter of fiscal 2024.

Speaker #6: Selling general and administrative expenses increased 0.3 million sequentially from last quarter. And decreased 0.8 million compared to the same prior year period. The increase from last quarter is primarily due to an increase in commissions and third-party consulting costs.

Speaker #6: The decrease compared to the same prior year period is primarily due to the ERC refund of 0.8 million and cost reductions attributed to actions we have taken to reduce our fixed cost structure.

Speaker #6: Research development and engineering expenses declined by 0.5 million quarter over quarter. Primarily due to the timing of project-specific purchases and the benefit of the ERC refund in the amount of 0.3 million.

Speaker #6: Compared to the same period last year, expenses were down 0.3 million. Reflecting the ERC benefit and non-recurring development efforts within our semiconductor fabrication solution segment.

Speaker #6: GAAP net income for third quarter of fiscal 2025 was 0.1 million or 1 cent per share. This compares to GAAP net loss of 31.8 million or 2.23 cents per share for the preceding quarter.

Speaker #6: And GAAP net income of 0.4 million or 3 cents per share. For the third quarter of fiscal 2024, non-GAAP income for the third quarter of fiscal 2025 was 0.9 million or 6 cents per share.

Speaker #6: This compares to non-GAAP net loss of 2.3 million or 16 cents per share. For the preceding quarter, a non-GAAP net income of 1.1 million or 8 cents per share for the third quarter of fiscal 2024.

Speaker #6: Unrestricted cash and cash equivalents at June 30th, 2025 were 15.6 million compared to 11.1 million at September 30th, 2024, this increase due primarily to our focus on operational cash generation, strong accounts receivable collections, from customers and the employee retention credit.

Speaker #6: Now for the outlook for the upcoming fiscal fourth quarter ending September 30th, 2025. We expect revenues in range of $17 to $19 million growth in AI-related equipment sales in our thermal processing solution segment is anticipated to partially offset continued softness in the mature node semiconductor product lines.

Speaker #6: With the benefit of previously implemented structural and operational cost reductions, we expect to deliver improved operating leverage resulting in adjusted EBITDA margins in the mid-single digits.

Speaker #6: We remain focused on driving further efficiency gains in cost optimization across AMTECH's operations, positioning the company to expand margins and generate more resilient profitability going forward.

Speaker #6: 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.

Speaker #6: Additionally, the semiconductor equipment industry can be cyclical and inherently impacted by changes in market demand. Actual results may differ materially in the weeks and months ahead.

Speaker #6: A portion AMTECH's results is denominated in renminbis, a Chinese currency, the outlook provided in this press release is based on an assumed exchange rate between the United States dollar and the renminbi.

Speaker #6: Changes in the value of the renminbi 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.

Speaker #6: Operator?

Speaker #1: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your touch phone.

Speaker #1: You will hear a prompt that your hand has been raised. Should you wish decline form, the polling process, please press the star followed by two.

Speaker #1: Just waiting for your first question. There are no questions at the moment. I'll now turn the call back over to Bob Daigle. Please go ahead.

Speaker #7: All right. Thank you. Well, thank ou for your interest in AMTECH and for joining our conference call today. We look forward to updating you on our progress in the months to come.

Speaker #7: Have good day.