Earnings Call Transcript - ASYS Q1 2025

Operator, Operator

Good day, and welcome to the Amtech Systems Fiscal First Quarter 2025 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.

Erica Mannion, Investor Relations

Good afternoon, and thank you for joining us for Amtech Systems Fiscal First Quarter 2025 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 first 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 would 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 this call today 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 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 the technologies used by customers and competitors; changes in the volatility in 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 Form 10-Q. Additionally, in today's conference call, we will be referring to non-GAAP financial measures as we discuss the fiscal first quarter results. You'll find a reconciliation of these non-GAAP measures to our actual GAAP results included in the press release issued today. Now I will turn the call over to Amtech's Chief Executive Officer, Bob Daigle.

Robert Daigle, CEO

Good afternoon, and thank you for joining us today. I'm pleased to report that our first quarter results exceeded our guidance with revenue of $24.4 million and $1.9 million in adjusted EBITDA. While revenue remained muted on a year-over-year basis due to continued softness in the markets we serve, our profitability continued to improve with year-over-year adjusted EBITDA increasing by $1.8 million. This performance underscores our ongoing focus on operational excellence and cost optimization. Over the past year, we have made significant progress restructuring our business to enhance our cost efficiency and improve our ability to adapt to market demand. These efforts are delivering tangible results. Our restructuring initiatives have yielded over $8 million in annualized cost savings to date, excluding one-time costs, and are expected to generate approximately $9 million in annualized savings by the end of the second fiscal quarter. The adoption of a semi-fabless model for our capital equipment segment has further strengthened our operating leverage by enabling us to right-size the organization and reduce fixed costs. This transition has positioned us well to efficiently support production with varying levels of market demand. Additionally, over the past several quarters, we implemented pricing actions to offset inflationary pressures and enhance our product margin profile. By the end of the second quarter, we will have shipped the majority of the low-price, lower-margin business in our backlog. Going forward, we will remain vigilant and adjust pricing as necessary to preserve profitability. Turning to our end markets. Demand remains muted for equipment and consumables supporting mature node semiconductor production for markets such as industrial equipment and automotive. However, demand for our reflow equipment in leading-edge applications such as AI infrastructure has continued to strengthen. While optimizing our cost structure remains a priority, given the macro backdrop, we are investing in growth initiatives in 2025 and have aligned our organization to better serve our customers. To that end, as we discussed last quarter, we have refined our business segments to provide greater clarity and focus. The Semiconductor Fabrication Solutions business previously known as the Materials and Substrate segment includes PR Hoffman and IDI consumables, Entrepix parts and services as well as some front-end capital equipment used for semiconductor wafer and device fabrication. Meanwhile, the Thermal Process Solutions business, formerly the Semiconductor segment, focuses on reflow equipment for advanced chip packaging and surface-mount assembly applications as well as furnaces for power electronic device production and packaging. Within the Semiconductor Fabrication Solutions business, our goal is to drive long-term sustainable growth by expanding the recurring revenue streams such as consumables, parts and services. These revenue streams not only provide higher margins but also deliver more predictable, less cyclical revenue growth. To achieve this, we are working to broaden our footprint with existing customers, unlock new opportunities at additional sites, and are actively pursuing opportunities to introduce more of our products to new customers. Additionally, we are leveraging our proven solutions to address similar challenges for other applications. To support these initiatives, we have expanded our team by adding a new business leader for our Semiconductor Fabrication Solutions business, as well as dedicated marketing and application development resources with deep industry knowledge. Although the near-term macro environment remains soft, we are confident about our future. Our restructuring efforts have strengthened our ability to navigate industry cycles, enabling us to generate profits during downturns while unlocking significant operating leverage as business scales. Looking forward, our long-term growth drivers remain robust. Investments in AI-related infrastructure and supply chain diversification are expected to drive a recovery in the capital equipment demand. While expectations for EV growth have moderated, we still anticipate double-digit expansion in this segment, which will continue to fuel demand for our silicon carbide-related consumables. In the medium term, we expect our focus on growing our consumables, parts and services offerings will provide higher margins and improved stability. Meanwhile, growing momentum in advanced packaging is providing a tailwind to capital equipment demand. Together, we believe these strategic initiatives and industry dynamics position us well for sustained growth and long-term value creation in the years ahead. With that, I'll turn it over to Wade for further details on our financial results.

Wade Jenke, CFO

Thank you, Bob. For fiscal Q1, net revenues increased 1% sequentially from last quarter and decreased 2% from a year ago. The sequential increase from last quarter is primarily due to increased sales of our diffusion and high-temperature furnaces, partially offset by lower sales of our wafer cleaning equipment. The decrease from the prior year is primarily attributable to lower sales of the wafer cleaning equipment. In the first quarter of fiscal 2025, our GAAP gross margin decreased by $0.4 million sequentially compared to last quarter due to a less favorable product mix. GAAP gross margin increased by $1.1 million compared to a year ago. This is driven by better margin profiles and cost savings despite lower revenue and due to intangible asset impairment last year by $0.8 million. Selling, general and administrative expenses decreased by $0.7 million sequentially from last quarter and decreased $0.5 million from a year ago. The decrease across both periods is primarily due to fixed cost reductions from our efforts. Research, development and engineering expenses decreased by $0.1 million sequentially from last year and decreased by $0.7 million from a year ago. The sequential decrease is primarily due to the timing of purchases related to specific R&D projects. The decrease from a year ago is attributable to development efforts in our Semiconductor Fabrication Solutions segment that did not reoccur. GAAP net income for the first quarter of fiscal 2025 was $0.3 million or $0.02 per share. This compares to GAAP net loss of $0.5 million or $0.04 per share for the preceding quarter and GAAP net loss of $9.4 million or $0.66 per share for the first quarter of fiscal 2024. Non-GAAP net income for the first quarter of fiscal 2025 was $0.8 million or $0.06 per share. This compares to non-GAAP net loss of $7,000 or $0.00 per share for the preceding quarter, and non-GAAP net loss of $0.6 million or $0.04 per share for the first quarter of fiscal 2024. Unrestricted cash and cash equivalents at December 31, 2024, was $13.2 million compared to $11.1 million at September 30, 2024, due to stronger accounts receivable collection and inventory management effort during the quarter. Now turning to our outlook. For the second fiscal quarter ending March 31, 2025, we expect revenues in the range of $21 million to $23 million with adjusted EBITDA nominally positive. Although the near-term outlook for revenue and earnings remains challenging, we remain confident that our long-term future prospects are strong for both our consumables and equipment serving advanced mobility and advanced packaging applications. We continue to optimize and reduce Amtech's structural costs. 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, 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 RMBs, 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 related to the U.S. dollar could cause actual results to differ from expectations.

Operator, Operator

Your first question comes from the line of Kevin Garrigan from Rosenblatt Securities.

Kevin Garrigan, Analyst

Congrats on the results. So just the first one. You guys have done a great job with the restructuring plan. Are there still additional costs that you can kind of take out of the business? And if so, what areas would those kind of be in?

Robert Daigle, CEO

Thank you for joining the call, Kevin. We are actively working on several initiatives. We have numerous projects in supply chain management that are currently in development. While we do have some existing inventory, we believe that by improving sourcing practices and enhancing our supply chain management, we can significantly lower input costs for some of the equipment used in our operations. Additionally, we are exploring areas for better footprint utilization to create more space, which will help us lower fixed costs. Our teams have been effective at identifying these opportunities and translating them into actual savings, and we plan to maintain this focus in 2025.

Kevin Garrigan, Analyst

Got it. That makes sense. For my second question, we've heard mixed outlooks during this earnings season, particularly concerning the automotive market. Can you share more about your observations in the market? Has the situation improved or worsened compared to three months ago?

Robert Daigle, CEO

Our guidance of $21 million to $23 million indicates that we are still experiencing softness in that segment, particularly in the automotive-related equipment sector. There are no strong signals of a swift recovery. Some original equipment manufacturers believe we have reached the lowest point, while others still report weak conditions. Therefore, we are anticipating continued softness. Regarding our growth initiatives, our focus over the past year has been on enhancing our cost structure and operational efficiency. Now, we are shifting our approach to take control of our growth and costs, and we are beginning to allocate resources to expand our market presence. Our aim is to prepare for market recovery while driving organic growth that surpasses just returning to market levels. We want to gain greater control over our future. Markets are cyclical and will recover, but in the meantime, we can take actions to boost revenue. Does that address your question, Kevin?

Kevin Garrigan, Analyst

Yes. Yes, it does. And then just as my final question. Bob, you had mentioned that you're seeing more activity in the advanced packaging space. Can you just kind of give us a little more color on what you're seeing in that area? And as AI kind of moves from training to inference and more towards the edge, where companies are looking for more efficient chips, do you guys expect to see stronger growth from this trend?

Robert Daigle, CEO

Yes. And let me give you a little bit of the context here. We talked about the past couple of quarters that we have been seeing strengthening in the advanced packaging area. Our customer base generally consists of the OSATs in many cases. So it's the companies that are packaging the chipsets for the AI data centers. I believe we're going to start to see the proliferation of more hardware out there to support AI on the edge. I think that'll drive more volume, which should bode well for the advanced packaging equipment side of things. So it's been a couple of quarters where we've seen some meaningful strengthening compared to where we were sitting in 2024 for our equipment. The players we're dealing with are the ones who have been successful in the industry.

Operator, Operator

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

Robert Daigle, CEO

Well, thank you for joining our conference call today, and we look forward to updating you on the progress we're making in the months to come. Have a good afternoon, good evening.

Operator, Operator

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