Amtech Systems Inc Q4 FY2025 Earnings Call

Good day, and welcome to the Amtech Systems Fiscal Fourth Quarter 2025 Earnings Call. Please note that this call is being recorded and simultaneously webcast. I would now like to turn the call over to Jordan Darrow of Darrow Associates Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. We appreciate you joining us for Amtech Systems' Fiscal Fourth Quarter 2025 Conference Call and Webcast. With me today on the call are Bob Daigle, Chairman and Chief Executive Officer; and Wade Jenke, Chief Financial Officer. After close of market today, Amtech released its financial results for the fourth quarter of 2025. 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 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 in the Investors section of our corporate website. The company assumes no obligation to update any such forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of today. These statements 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 are changes in 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 equity and credit markets and market acceptance risks; ongoing logistics, supply chain and labor matters, and capital allocation plans. Other risk factors are detailed in our SEC filings, including our Form 10-K and Form 10-Q. Additionally, in today's conference call, we will be referencing non-GAAP financial measures as we discuss the fiscal fourth quarter financial results. You will find a reconciliation of those 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.

Thank you, Jordan, and good afternoon, and thank you for joining us today. I'm pleased to report that our fourth quarter performance was above expectations with revenue of $19.8 million versus a guidance range of $17 million to $19 million. Strength in demand for the equipment we produce for AI applications continues to be our primary growth driver. However, both our Thermal Processing Solutions and our Semiconductor Fabrication Solutions segments did exceed forecast, reflecting our strong position for advanced packaging solutions in AI markets and more stable demand within the mature node semiconductor market. Adjusted EBITDA also came in above expectations at $2.6 million or about 13% of revenue versus the mid-single-digit EBITDA expected. These recent results are demonstrating our strong operating leverage and ability to generate cash. We ended the quarter with almost $18 million of cash on the balance sheet and continue to have no debt after paying it off last year. The cash swing over the past two fiscal years enabled us to eliminate our debt, which stood at over $10 million and increased our cash to current levels. Our stronger-than-expected results for the quarter reflect the combined contribution of improved operational discipline, the benefits of our transition to a more flexible semi-fabless manufacturing model, and our focus on higher-margin products where we have competitive advantages. Expanding on our end markets, within the Thermal Processing Solutions segment, advanced semiconductor packaging remained a highlight this quarter with continued strength driven primarily by ongoing investments in AI infrastructure. For context, in the fourth quarter, revenue from equipment used for AI infrastructure accounted for over 30% of our Thermal Processing Solutions revenue versus 25% in the prior quarter. Based on our channel checks, we see no slowdown for this area of our business. Related to revenue mix, we generated about 60% of our revenue from capital equipment and 40% from reoccurring revenue, including consumables, parts, and services. The balance between capital equipment and recurring revenue is important and reflects our strategy to expand higher-margin recurring revenue streams while we fully capitalize on opportunities for equipment used to expand AI infrastructure. As we look ahead, our fourth quarter bookings suggest we should continue to see strength for AI-related equipment revenue. To fully capitalize on this growth opportunity, we are continuing to invest in next-generation equipment that enables volume production of higher-density advanced packaging and electronic assemblies to increase our addressable market and the value we provide to customers. Turning to our Semiconductor Fabrication Solutions 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. That said, performance in this segment slightly exceeded our expectations in the quarter. Beyond the cyclical ebbs and flows of this market, we remain committed to controlling our own destiny by investing in applications and product development to solve problems faced by our customers. We expect these initiatives to deepen customer relationships and increase recurring revenue streams as customers qualify our products and scale production. While these initiatives will take time to scale, we are encouraged by the level of customer interest and engagement. This is all part of our strategy to overserve the underserved. As a relatively small player in a very large overall market for semiconductor consumables and equipment, we are targeting high-end, high-margin applications where we can leverage strong technical capabilities and provide exceptional service. End markets include med tech and defense applications, among others, where we have strong customer engagement enabled by our foundry service and differentiated capabilities so we can develop sticky recurring revenue streams. Over the past 18 months, we've made tremendous progress optimizing our operating model and improving our cost structure. We implemented a series of cost reduction initiatives that included the elimination of some unprofitable products and a shift of some products to outsourced partners to reduce labor and fixed overhead costs. These initiatives, which include consolidation of our manufacturing footprint from seven sites to four sites resulted in $13 million of annualized savings. Looking ahead, we expect to realize additional savings by subletting underutilized factories. These actions have significantly reduced our EBITDA breakeven point, improved our ability to scale profitably with higher volumes. With the majority of major optimization initiatives completed, we are now focused on growth initiatives to fully capitalize on AI equipment opportunities and increase our recurring revenue. Our improved financial performance, prospects for continued operating cash flow generation, CapEx-light business model, and a strong balance sheet have provided us with the flexibility to return capital to shareholders while also investing in growth opportunities. So Amtech's Board of Directors has authorized a share repurchase program of up to $5 million of the company's common stock for a one-year period. In summary, we have a strong foundation for growth driven by AI market opportunities and differentiated capabilities. The changes we've made to optimize our business model and streamline our product portfolio have created strong operating leverage, which positions us well to elevate profitability as we grow and create meaningful shareholder value. With that, I'll turn it over to Wade for further details on our financial results.

Great. Thank you, Bob. Net revenues increased sequentially from the third quarter, driven primarily by strong demand in Asia for reflow ovens used in AI applications. The decrease in net revenues compared to the same period last year reflects higher AI-related revenues, offset by substantially lower mature node semiconductor revenues, primarily from sales of wafer cleaning equipment and parts in our Semi Fabrication Solutions segment. In our Thermal Processing Solutions segment, diffusion furnaces and high-temperature furnaces drove the decline in sales. GAAP gross margin decreased by $0.3 million sequentially from the prior quarter and decreased $1 million compared to the same prior year period. The decrease from the prior quarter was due to the one-time Employee Retention Credit received in the third quarter of 2025. The decrease in gross margin from the same prior year period is primarily due to lower sales volume in the mature node semiconductor market. Gross margin as a percentage of sales increased from 40.7% in the same prior year period, up to 44.4% this current year quarter, driven by cost saving initiatives and product mix. Compared against the third quarter of 2025 and excluding the ERC one-time credit, gross margin would have been 41.5% versus the current fourth quarter of 44.4% gross margin, showing a nice sequential improvement. Selling, General and Administrative expenses decreased $1 million sequentially from the prior quarter and decreased $2.4 million compared to the same prior year period. The decrease from the prior quarter and the same prior year period is primarily due to cost reduction efforts around overhead expenses and cost structure changes to reduce our fixed costs. Research, Development and Engineering expenses increased by $0.2 million sequentially from the prior quarter and decreased $0.4 million compared to the same prior year period. The increase from the prior quarter is primarily due to growth initiatives and the decrease compared to the same prior year period is primarily due to a more focused approach to our investments in innovation. GAAP net income for the fourth quarter of fiscal 2025 was $1.1 million or $0.07 per share. This compares to GAAP net income of $0.1 million or $0.01 per share for the preceding quarter and GAAP net loss of $0.5 million or $0.04 per share for the fourth quarter of fiscal 2024. Non-GAAP net income for the fourth quarter of fiscal 2025 was $1.4 million or $0.10 per share. This compares to non-GAAP net income of $0.9 million or $0.06 per share for the preceding quarter and non-GAAP net loss of $7,000 or $0.0 per share for the fourth quarter of fiscal 2024. Unrestricted cash and cash equivalents at September 30, 2025, were $17.9 million compared to $11.1 million at September 30, 2024, due primarily to the company's focus on operational cash generation, working capital optimization, strong accounts receivable collections from customers, accounts payable management, and the employee retention credit. Now turning to our outlook. For the first quarter, fiscal ending December 31, 2025, the company expects revenue in the range of $18 million to $20 million. AI-related equipment sales for the Thermal Processing Solutions segment are anticipated to partially offset the transitions in our business related to mature node semiconductor product lines, with the benefit of previously implemented structural and operational cost reductions. Amtech expects to deliver solid operating leverage, resulting in adjusted EBITDA margins in the high single digits. Amtech remains focused on driving further efficiency gains and cost optimization across all operations, positioning the company to expand margins and generate more consistent profitability going forward. Operations can be significantly impacted positively or negatively by the timing of orders, system shipments, logistical challenges, and the financial results of semiconductor manufacturers. Additionally, although the company has been generating more revenues from recurring and consumable sales, the balance of the business is from semiconductor equipment industries, which can be cyclical and inherently impacted by changes in market demand and capacity utilization. The outlook provided during our call today and in our earnings press release is based on an assumed exchange rate between the United States dollar and foreign currencies. Changes in the value of foreign currencies in relation to the United States dollar could cause actual results to differ from expectations. As you may have seen in our 8-K filing, I have submitted my resignation as Chief Financial Officer, effective as of the close of business on December 29, 2025. My decision to step down is not a result of any dispute or disagreement with Amtech Systems. The decision is based upon my personal and family interest in mind. I will be assuming an executive role at a different company. I have agreed to serve in a consulting capacity for a period of up to six months to assist with the closing of the first quarter of fiscal 2026, the preparation and filing of the 2026 Annual Meeting proxy statement, and the transition of my duties to a new CFO. Amtech Systems plans to launch a search for a new CFO immediately. I want to take a moment to thank the Amtech Systems team who has achieved and improved substantially under my tenure. I also want to thank Bob Daigle for his tremendous vision and leadership as CEO. I have learned so much, and I will be eternally grateful for the opportunity. Thank you. And I will now turn the call over to the operator for questions.

And the first question will come from Craig Irwin with ROTH Capital Partners.

Yes, I was on mute. I apologize for that. So Bob, can you maybe talk a little bit about your visibility with AI customers? I don't know if you can maybe just give us general color on backlog and backlog trends or orders and order indications and maybe even just the direct investment you're seeing in the different facilities that you're selling into there as far as the customer commitments.

Yes, let me explain that, Craig. In general, we are experiencing very strong demand. Most of the equipment in the pipeline is being allocated to existing facilities, but we are also hearing about new facilities being constructed. Therefore, there are plans in place that extend well into the future. Regarding our visibility and backlog, we have an efficient manufacturing organization for this backend equipment that allows us to book and ship within the same quarter. Our lead times from our Shanghai factory typically run about six weeks, so we usually get orders and ship them during the same quarter. However, there has been an increase in business where some customers inform us that they are still completing their factories, which means they may want delivery in the March or even the June quarter. I would say we are gaining more visibility due to other critical factors in installing the equipment. Yet, for the most part, our volume has been driven by bookings and shipments occurring in the current quarters.

You've clarified the nature of the business previously, and it makes sense that it isn't changing but rather progressing well. One area where you have impressed me over the last couple of years is in execution, particularly with the $13 million in savings from operational expenses. Can you outline what potential savings could come from subletting underutilized facilities? I’m not sure if you can provide specifics about which facilities are involved, whether they are properties for sale or leased spaces that can be subleased, or if there are any assets that could be sold.

Yes. No, these are leases of underutilized facilities in both segments. Combined, we're probably looking at once we sublet both facilities, let's say, $700,000 to $1 million in annualized savings associated with those.

Okay. Excellent. Excellent. Then to change subjects again, there's quite a lot of interest out there about new applications for silicon carbide. Some of these AI chip producers are apparently looking at different substrates for future generations of chips. I know you guys get involved very early on with different customer groups as far as development necessary for new processes. Are you seeing some new customers maybe come in or new opportunities come in that might broaden your participation away from TPS into substrates for some of the AI momentum we're seeing in the market?

Yes. If it moves to silicon carbide for processing, our involvement would primarily be in consumables. I expected you to mention that there is considerable discussion about data centers shifting from low-voltage power throughout the facility to high voltage, which can then be stepped down at the rack. This change can significantly decrease the amount of copper required for wiring in AI data centers. I'm hearing more about this, especially since the EV market is currently struggling, presenting a potential growth opportunity for silicon carbide in power electronics for these data centers. I've also heard some talk about silicon carbide in substrates, which could translate into consumables for us if it develops further.

Yes, I can clarify that for you. I know that the silicon carbide produced by Wolfspeed is used by EPC Power, a private company in California, for the EPC power blocks sold by Vertiv, which utilize 3.3 kV MOSFETs that handle much higher power than the MOSFETs used in electric vehicles. This is the main product being implemented in leading-edge data centers today. I have observed that DC is adopting silicon carbide for power. What truly piques my interest is whether it could be used as a substrate for the actual AI chips, not just for power applications.

Yes. I believe that development is still some time away; I haven't heard any news indicating that it is imminent, I would say, Craig.

The next question will come from Michael Legg with Ladenburg.

Bob, now that you've done a great job cleaning up the balance sheet and getting costs in line and your comment on overserving the underserved, can you talk a little bit about the opportunity in the service area?

Yes. Our focus is on high-value niche opportunities in the market. For instance, in large semiconductor application areas, companies typically receive high service levels, consistent product availability, and development support for new products. However, we are discovering opportunities that are more niche, particularly in the medical and defense sectors. For major players, the volumes might not seem significant, but for us, these niches provide an important recurring revenue stream. We are utilizing our foundry services for contract development, helping to qualify products with some OEMs to introduce our offerings as alternatives to larger competitors. Although this process requires time for qualification, it establishes a loyal customer base and has a favorable margin profile. It also fosters strong relationships with key customers because we can support them in ways that many others cannot.

Okay. Great. And then just a follow-up. On the CFO search, can you give us any update on your progress there?

Yes. We've just started the search, and we will keep everyone updated as it progresses. However, we are still in the early stages.

The next question will come from Mark Miller with The Benchmark Company.

Just wanted to clarify, you indicated that the spread between equipment and recurring revenues was 60-40. Was that for both the Thermal Processing and the Semi Fab sales? Or was it some differences there?

Yes. It's overall, I'd say the majority of the Semi Fabrication Solutions are the consumables parts service. And probably of the TPS segment, I'll give you a rough number, let's say, 80% equipment, 20% on the recurring side.

In terms of your backlog, you've mentioned a focus on higher-margin products. What does the margin profile of your existing backlog look like? Is it better than what you've been reporting recently?

Yes, we have largely addressed that issue, Mark. When we discussed this a year or a year and a half ago, we had many items in our backlog that had lower margins, but we've moved past that now. What remains is primarily of high quality.

You indicated that auto remains soft for you, but I was a little surprised by that because it's my understanding, at least for EVs that auto sales in China are better this year than last year.

Yes, most of our exposure in the auto industry is with the Western OEMs, specifically U.S. and European players, and less so in Mainland China. My comments were directed towards the semiconductor industry that supports the Western market.

The next question will come from George Marema with Pareto Ventures.

A couple of questions. Do you guys expect any effect from the ramp-up of Blackwell versus Hopper and also kind of the ramp-up of these custom ASICs like TPUs, et cetera?

They are essentially utilizing our knowledge of similar processes and equipment capabilities. Therefore, to the extent that they increase production, the additional volume is advantageous. However, I would not say there are significant technological differences at this point that would significantly affect us if the mix changes.

Okay. And then as you look out to '26 in terms of your focused R&D on innovative investments and new products, any update on any new products for '26 and new initiatives?

Yes. Let's discuss our initiatives. We are focusing on two main areas for our investments. On the Thermal Process Solutions side, our aim is to enable continuous processing for higher density, tighter pitch devices. We believe this may create opportunities for us to be involved in more processes used for GPUs, TPUs, and the electronic assembly of densely packed boards for AI data servers. Our emphasis for TPS is to increase our participation in more of these processes. The equipment we are dealing with is quite complex, and the requirements are becoming stricter, which we anticipate will lead to a significantly higher average selling price. On the SFS side, we are investing to drive growth in our consumables, particularly in our chemicals business. We have strong capabilities in application development that utilize our foundry, along with talented technology personnel in our R&D labs and skilled formulators. We believe that many customers can greatly benefit from our capabilities and support. We are focused on these investments, but we are also mindful that as a small company, we cannot pursue grand initiatives. Instead, we are concentrating on customer engagement to convert our R&D efforts into meaningful revenue as quickly as we can.

Okay. And then one last one. Has there been any change in the competitive landscape in the thermal area?

Nothing that I'm aware of visible to, George. I think it's pretty much a similar situation in that space.

Ladies and gentlemen, at this time, we've reached the end of the question-and-answer session. I'd like to turn the floor back over to management for any closing remarks.

All right. Thank you. Well, first of all, in closing, I'd like to thank Wade for his service to Amtech over the past 16 months and his assistance as we transition the responsibilities to a new CFO. Our back-office processes and systems have greatly improved as a result of Wade's efforts, and I wish him the best in his role in his new company. In closing, I also want to thank everybody on the call today or those who will participate in the recast for their interest in Amtech and for joining our conference call today. We look forward to updating you on our progress in the months to come. Have a good evening, everyone.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.