Good day, and welcome to the Amtech Systems Fiscal Fourth Year and Full Year 2024 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' fiscal fourth quarter and full year 2024 conference call. With me on the call today are Bob Daigle, Chairman and Chief Executive Officer; and Wade Jenke, Chief Financial Officer. After the close of market today, Amtech released its financial results for the fiscal fourth quarter and full year of 2024. The earnings release is posted on the company's website at www.amtechsystems.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 the 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 statements. 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 materially from 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 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 fourth quarter financial and year-end results. You'll find a reconciliation of non-GAAP measures to our actual GAAP results included in the press release issued today. I would now like to turn the call over to Amtech's Chief Executive Officer, Bob Daigle.

Thank you, Erica. Well, good afternoon, and thank you for joining us today. As we conclude our fiscal year, I'd like to take a moment to reflect on the strides we've made to transform our business and strengthen our foundation for future growth. Looking back over the last 12 months, I'm proud of what our team has accomplished. We've made significant progress in streamlining our business with a specific emphasis on optimizing our operations and delivering positive operating cash flow across all segments, even amid a strong secular downturn. While overall revenue was down 11% year-over-year in fiscal year 2024, we delivered $4 million of adjusted EBITDA profit compared to $1.8 million in fiscal year '23. Contributing to this result earlier this year, we implemented a comprehensive restructuring plan, which included organizational adjustments, cost reductions, and operational enhancements. These efforts have translated into $7 million of annualized operating savings, making our business both more efficient and enabling us to mitigate the existing market dynamics more effectively. As part of this initiative, in early 2024, we took the strategic action to streamline our product portfolio by exiting from the unprofitable legacy equipment business at PR Hoffman and investing in our more profitable and growing consumables business. This shift has paid off as sales of consumable products at PR Hoffman surged by 28% year-over-year despite overall revenue growth of just 2%. Within our BTU business, with a sharp decline in demand for equipment, we've accelerated our shift to a hybrid manufacturing model, combining in-house production with outsourced capabilities. In addition to strengthening our supply chain, this initiative has allowed us to manage lead times, reduce capital expenditures, and enhance our operational flexibility. From a cost savings perspective, while these efforts remain ongoing, by the middle of the next fiscal year, we expect to realize approximately $2 million in additional operational savings above the $7 million we have previously discussed. Beyond the core operations of our business in response to the escalating input costs we faced over the past several years, we strategically adjusted pricing across our offerings, helping ensure we protect our margins while maintaining our competitiveness. Combined, despite continued weakness in the market, we managed to maintain positive adjusted EBITDA and reduce working capital to pay off our debt to end the year with a cash balance in excess of $11 million. Most of our efforts in 2024 are focused on optimizing our business to improve profitability. As we begin our 2025 fiscal year, we are now focusing much more of our attention on driving sustainable long-term growth with reoccurring revenue streams, such as consumables, parts, and services. We believe these revenue streams will strengthen our financial performance in the years ahead by providing higher margins with less cyclical revenue growth. To accelerate the growth in these areas of focus, we recently invested in both business leadership and marketing resources. In addition, as we close our fiscal year, we have renamed our business segments to better align with the markets we serve. Our semiconductor fabrication solutions business, previously known as the Materials & Substrates segment, will now focus on growing our consumables, parts, and service offerings for semiconductor wafer and device fabrication. Meanwhile, our thermal processing solutions business, formerly the semiconductor segment, will focus on capital equipment for advanced packaging with an emphasis on applications that support AI data centers and continuing to grow our parts and services businesses. Market demand challenges persist in semiconductor segments that are not associated with AI infrastructure. Our consumables parts and services business did experience some growth in 2024 and even with the broad market headwinds, but could not overcome the strong headwinds from very weak demand in equipment in areas that were not associated with AI infrastructure. Timing for a broader market recovery remains uncertain, but we are well-positioned to deliver strong operating results when demand recovers. In conclusion, we are quite proud of the progress we've made this year. Through our strategic actions to optimize our operations, reduce costs, and strengthen our balance sheet, we've set ourselves up for more profitable and sustainable growth as markets recover. We are now focused on fully capitalizing on the emerging opportunities in AI infrastructure and expanding our reoccurring revenue streams to drive margin improvement and accelerate growth. Although the current macroeconomic environment is challenging, we are optimistic that our ongoing transformation will deliver profitable growth with high returns on invested capital so we can create meaningful shareholder value. With that, I'll turn it over to Wade for further details on our financial results.

Thank you, Bob. Net revenues for the fourth quarter decreased 10% sequentially and decreased 13% from the fourth quarter of fiscal 2023. The sequential decrease is primarily due to lower sales of our diffusion furnaces, reflow, and wafer cleaning equipment, partially offset by higher consumable parts and service revenue. The decrease from the prior year is primarily attributable to lower sales across most of our product portfolio due to the slowdown in the broader semiconductor market. In the fourth quarter of our fiscal 2024 period, our GAAP gross margin increased by $7 million compared to the same prior year period. This is driven by better margin profiles, product mix, and cost savings this year while in the fourth quarter of 2023, we had a $4.6 million intangible asset impairment charge and a $1.5 million write-down of inventory related to the polishing equipment line. On a sequential basis, GAAP gross margins in our Thermal Processing Solutions segment were positively affected by product mix attributed to increased revenue for parts and services as well as improved material costs. GAAP gross margin in our semiconductor fabrication solutions segment slightly decreased on a sequential basis due primarily to less favorable product mix on consumables and equipment. Selling, general and administrative expenses increased by approximately $0.6 million on a sequential basis and decreased $2.3 million compared to the fourth quarter of 2023. 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 a $0.5 million intangible asset impairment charge and lower labor and labor-related expenses as a result of our cost reduction initiatives as well as lower shipping expenses and lower revenues. Research and development and engineering expenses increased by $0.3 million sequentially and decreased $1.6 million compared to the prior year fourth quarter. With the sequential decrease due primarily to the timing of purchases related to specific projects in both segments, and the decrease from the prior year fourth quarter was attributable to development efforts in our semiconductor fabrication solutions segment that did not reoccur. GAAP net loss for the fourth quarter of fiscal 2024 was $0.5 million or $0.04 per share. This compares to GAAP net income of $0.4 million or $0.03 per share for the preceding quarter and a GAAP net loss of $12 million or $0.85 per share for the fourth quarter of fiscal 2023. Non-GAAP net loss for the fourth quarter of fiscal 2024 was $7,000 or $0.00 per share. This compares to non-GAAP net income of $1.1 million or $0.08 per share for the preceding quarter and a non-GAAP net loss of $2.5 million or $0.18 per share for the fourth quarter of fiscal 2023. For cash, unrestricted cash and cash equivalents at September 30, 2024, were $11.1 million compared to $13.1 million at September 30, 2023. Debt payments during the 3 months ended were $4 million, which included the final payment of our term loan and revolving credit facility. Net cash as of September 30, 2024, was $10.8 million compared to $2.4 million as of September 30, 2023. 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 2024 will reduce Amtech's structural cost 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 be 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. 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.

Your first question comes from the line of Craig Irwin from ROTH Capital Partners.

First, I should say, congratulations on the really good execution, bringing down costs. Tightening everything up in this environment that we're all operating through. So great, great execution there. My question is this, and it's a little bit high level, but you're renaming your segments, right? And that speaks for a refreshed and renewed strategic focus. Can you maybe call out some of the applications or opportunities where you think Amtech can participate in sort of AI and data center growth and electricity demand growth over the next several years? What do you see as relatively fresh products that you have to offer into this market? And how do you expect this to take shape as far as visibility for the investment community?

All right. Great. Great. Great. Yes. So let me start again at the high level. There were a couple of reasons for really revisiting our segment definitions. And some of it was, 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 involved with solar. So it was either a solar business or semi. When I look at our business, we really have the front end of our business, which is really involved in actual semiconductor device fabrication, which again, is broader than just materials and substrates. A lot of what we do there is involved services and parts for that part of the business. Then what we've been referring to as the semiconductor segment is really back-end packaging and assembly of the electronics. It was trying to clean this up and get a clearer definition about we have the front end of our business, which is semi-fab related, and then we have the back end, 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. Obviously, AI, everybody has been targeting AI as a growth driver for their business. We're no different. We play there. We have been playing there. Primarily on the back end, our reflow equipment, for example, is used extensively in advanced packaging applications for semiconductor production. We are also looking, however, at opportunities that are adjacent that would relate a little bit more on the consumables side where we are working in early stages with some customers that have unique solutions for packaging and in particular, thermal management, which has been talked about in terms of the challenges with these more advanced AI chips, how much heat they're generating. We are involved and have been involved in consumables at the front end with one of our customers that is heavily focused on trying to solve those problems. I see that as an opportunity really to broaden what we're doing in an area of AI beyond just the back-end equipment but also in the consumables area. But stepping back even further from that, I see the consumables parts and service business, which as we noted in the call, 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, we did see growth. All of our decline was driven by weakness in the equipment sector. When I look ahead, I want to see us transform Amtech into much more of a consumables parts service business. Not that equipment areas, especially AI related, are very much of interest, but I do see those areas as driving our margins and driving growth opportunities. As we mentioned in the script, that's really where we're investing. We've brought on talent. We were very fragmented in what we're now calling semiconductor fabrication solutions. We were managing those as three tiny businesses, and they're now under single leadership with shared commercial resources in marketing and sales. We will also share in the areas of product development as we move forward. I see the investments in those areas where we've been pretty passive, but I believe there's plenty of opportunity for us to proactively grow that part of the business. It will not only improve our margins, drive growth, but will also reduce the cyclicality that is inherent to any business that's heavily reliant on equipment sales. Don't know if that answered your question, Craig, or if you'd like me to elaborate on anything happy to add color.

It goes a long way to answering the question. It actually starts to address the secondary question I wanted to ask about the excitement surrounding Amtech's involvement in the silicon carbide industry, which is an emerging power semiconductor technology that could significantly impact our economy, not just in electric vehicles but also in industrial and military equipment, among other areas. It seems that Amtech is well positioned on the consumables side to cater to a niche in the consumables for wafer production. Can you share your growth in the consumables business? Did you experience absolute growth in cassettes and other materials supplied to the silicon carbide industry? As you mentioned, that industry is undergoing a cyclical readjustment, but there is real growth happening. Are you observing more growth in cassettes for 8-inch and 6-inch wafers? Could you discuss where you see positive developments in that industry?

Yes, we have been actively involved in silicon carbide wafer production through our consumables from PR Hoffman, and we've experienced significant year-over-year growth in that segment, specifically 28%. This growth is largely driven by silicon carbide. Although the enthusiasm for electric vehicles has somewhat diminished and there have been inventory corrections happening, I personally believe that the anticipated market growth of 30% to 40% related to electric vehicles will likely normalize to around 15% to 20%, which is still substantial. One factor to consider is the extensive global investment in silicon carbide, particularly in Mainland China, as there is ongoing effort to expand its application base. Initial expectations for silicon carbide growth directly tied to electric vehicles have been moderated. However, we might still approach those higher growth rates when considering both electric vehicles and various other application areas being developed. I remain optimistic about the growth potential for both electric vehicles and silicon carbide for our business. We have a broad participation in this attractive market, and while enthusiasm for electric vehicles may be tempered, I believe it will be somewhat balanced by the growth in other applications.

Your next question comes from the line of Mark Miller from The Benchmark Company.

I'd like to congratulate the management on cost management and the expectations for further cost reductions next year. I'm trying to understand why your cash decreased by $2 million last quarter. What is your outlook for cash flow generation over the next six months?

I can take that. So our cash flow generation will be partially fueled by our operation activities as we reduce inventory. And then, of course, our positive EBITDA in the future quarters.

Just note, Mark, we paid off. What was the number?

We paid off around $4 million.

Yes. So the reason cash went down is we've paid off the rest of our debt, right? We wanted to be debt-free. So we basically paid off $4 million, and we're done, no more debt right now.

Okay. So there's no more covenants or anything you have to worry about because you paid off your term loan and revolver.

Yes. And frankly, 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. A big believer is we are going to control our own destiny on costs. We're going to control our own destiny in the medium and long term by our growth initiatives that don't just rely on market recovery, but look at expanding our business. It will be nice when the market actually does recover, which it will. I just don't know when that will be.

Your margins ticked up. You were saying there was a mix. I'm just wondering, margin outlook ticked up is the highest of the year for the fourth quarter. I'm just wondering what you're thinking about in terms of margin outlook.

Yes, sure. For our margin outlook in Q1 of fiscal year 2025, we expect it to be slightly below the Q4 performance based on what we are planning to ship that quarter. However, after that, we anticipate being in the range of 40%. Much of the restructuring we undertook was focused on achieving this, targeting similar volume and revenue numbers while maintaining a mix in that 40% range. We hope that increased revenue will contribute positively. As revenue and volume increase, we expect to gain more operating leverage, which will help us manage overhead costs effectively and improve our margins. The contract manufacturing strategy that Amtech has implemented should also lead to better outcomes in the future.

Did R&D increase last quarter? Do you anticipate that it will decrease in the third quarter in terms of the average for 2025?

R&D this quarter was slightly higher, but that increase was partially offset by some of our R&D expenses being deferred from Q3 to Q4. If you average the two quarters, we’re essentially returning to our usual run rate.

Can you tell me relate what that is, please?

We should be right around $1 million for the quarter.

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

All right. Well, 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, and have a good evening.

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