Amtech Systems, Inc. (ASYS) Earnings Call Transcript

Thank you. Good day, and thank you for standing by, everyone and welcome to the Amtech Systems Fiscal 2026 Third Quarter Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jordan Darrow of Darrow Associates Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. We appreciate you joining us for the Amtech Systems Fiscal 2026 Third Quarter Conference Call and Webcast. With me on today -- on the call today are Bob Daigle, Chairman and Chief Executive Officer; Guy Shechter, President and Chief Operating Officer; and Tom Sabol, Chief Financial Officer. After close of market today, Amtech released its financial results for the third quarter of fiscal 2026. The earnings release is posted on the company's website at www.amtechsystems.com in the investor section. We issued a second press release after the market closed today, also available on the website, addressing executive appointments and transitions, which will be discussed during today's conference call as well. Before we begin, I'd like to remind everyone that Safe Harbor Disclaimer and our public filings cover this call and the webcast. Some of the comments we make 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 on the investor section of our corporate website. The company assumes no obligation to update any such forward-looking statements. You are cautioned to not place undue reliance on forward-looking statements, which speak only as of today. These statements are not guarantees of future performance, and actual results can differ materially from current expectations. Among the important factors which could cause actual results to differ materially from those in forward-looking statements are changes in technology used by customers and competitors, change in volatility, and the demand for products, the effect of changing worldwide political and economic conditions, including trade sanctions, and 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 financial results for the third quarter. You will find a reconciliation of those non-GAAP measures to our actual GAAP results included in the press release issued today. I'll now turn the call over to Amtech's Chief Executive Officer, Bob Daigle.

Thank you, Jordan. As Jordan mentioned, we made two announcements after the market closed today. The first was our third quarter earnings, highlighted by continued strong AI-related growth. The other announcement was in connection with the Chief Executive Officer transition for the company. I'll start by addressing our third quarter results. Revenue for the quarter was $22.4 million, up 14% year-over-year and at the top end of our guidance range. Strong AI-related demand within our Thermal Processing Solutions segment drove growth during the quarter that was partially offset by weaker sales in our Semiconductor Fabrication Solutions segment. AI-related revenue for our thermal process solution segment was very strong, up by approximately 120% from the prior year period. Profitability exceeded guidance due to the strong operating leverage generated by our semi-fabless model and other enhancements made during the past two plus years. Gross margin increased to 50 percent for the quarter and adjusted EBITDA of $3.3 million approached 15 percent of sales. The combination of higher revenue margins and disciplined execution also continue to support strong cash generation. Our thermal processing solution segment delivered excellent results for the quarter. Year over year, revenue grew by almost 25% due to robust demand for AI-related equipment, which accounted for more than 40% of segment revenue. In addition, parts and services revenue increased by approximately 30% compared to the same quarter last year, reflecting the continued success of our customer outreach initiatives. As broadly reported, semiconductor manufacturers, OSATs, and other participants in the AI supply chain continue to expand capacity to support significant AI infrastructure investments. Advanced packaging continues to serve as a critical enabler of artificial intelligence by supporting increasingly complex semiconductor architectures. Capital equipment capable of delivering high yields, excellent throughput, and highly repeatable process performance remains essential to supporting this growth. Demand for our advanced packaging equipment and AI server board assembly solutions remains exceptionally strong due to our differentiated capabilities, including TrueFlat technology and an industry-leading temperature uniformity. The book-to-bill ratio for our Thermal Processing Solutions segment approached 1.4 in the quarter, driven by AI-related equipment demand. This is our third consecutive quarter where our book-to-bill exceeded 1. Despite our relatively short lead times, we are seeing a significant increase in booking scheduled for shipment in future quarters, providing confidence that AI-driven demand will continue to be a meaningful growth driver. In addition, an exciting new development during the quarter was the receipt of our first order for equipment used in the production of cooling components for AI semiconductors. This application expands our participation in AI infrastructure build-out beyond advanced packaging and server board assembly and represents another attractive growth opportunity for our business. To accelerate growth beyond 2027, our teams are developing new equipment platforms and process capabilities designed to support emerging semiconductor applications and higher density packaging requirements. We plan to introduce some of these new products and capabilities at the SEMICON Taiwan Trade Show in early September. We believe these new capabilities and products should significantly expand our addressable market and help support sustainable growth in the years ahead. Turning to our Semiconductor Fabrication Solutions segment, the year-over-year revenue decline was primarily driven by a significant reduction in demand for our PR Hoffman templates used in silicon carbide substrate manufacturing. Unfortunately, due to structural changes in the silicon carbide industry, we do not expect meaningful recovery in demand. To revitalize growth in this segment, our strategy remains focused on serving customers and applications that are underserved within the industry. We're continuing to invest in customer outreach and engagement initiatives to grow our parts and services business and new product development to grow our specialty chemicals business. At Entrepix, our parts and service business delivered another strong quarter with revenue increasing 19% year over year. While we invest in revitalizing growth, the SFS business is making some contribution to our overall profitability by covering a portion of our corporate overhead costs. Across Amtech, the operating leverage and working capital efficiencies created through our product line rationalization efforts and transition to a semi-fabless operating model over the past two plus years continues to deliver meaningful value. We ended the quarter with $83.1 million of cash, including $56.5 million of net proceeds from an oversubscribed public offering of nearly 3 million shares of common stock, which was essentially done at market price. Excluding the capital raise, cash at the end of the quarter was up $2.2 million from the prior quarter and $11 million from the prior year. While we're pursuing additional growth capital -- while we weren't pursuing additional growth capital, we felt the timing was right to opportunistically bolster our balance sheet in anticipation of opportunities to supplement organic growth with synergistic acquisitions. Before Tom provides more details concerning our financial performance, I'd like to briefly address the leadership transition we announced today. After serving as Chairman and Chief Executive Officer for the past three years, I will transition to the role of Executive Chairman, and Guy Shechter will assume the position of Chief Executive Officer. Guy has also been appointed to our company's Board of Directors. This transition is a result of a thoughtful, successful planning process led by our Board of Directors and reflects a commitment to strong corporate governance, leadership continuity, and long-term value creation. As Executive Chairman, I will be working closely with Guy to ensure a seamless transition and remain actively involved in supporting our long-term growth strategy. Since joining Amtech earlier this year as President and Chief Operating Officer, Guy has quickly established strong connections with our customers, partners, and employees while helping to further align our operations, growth initiatives, and product development efforts. We'll now turn the call over to Guy so he can introduce himself and provide some additional background.

Thank you, Bob. I appreciate the confidence that you and the Board have placed in me, and I'm honored to lead Amtech as we enter this next phase of growth. I look forward to working with you, the Board, and the Amtech team to build on the company's strong foundation and continue advancing our strategy. I bring more than 25 years of leadership experience in semiconductors and advanced packaging equipment industries, including product management, operations services, and general management. Prior to joining Amtech, I held senior leadership roles at Yield Engineering Systems and Veeco Instruments where I focused on developing high-performing teams, delivering differentiated products and services, and driving profitable growth. Since joining Amtech earlier this year, I've spent time across our global operations and with customers around the world. Those discussions have reinforced my confidence in the strength of Amtech's brand, the depth of our customer relationships, and the opportunities we have to expand our presence in attractive growth markets. We see strong demand for technologies that enable AI-driven semiconductor manufacturing and advanced packaging. Amtech is well positioned to capitalize on these trends by strengthening its core businesses, expanding the technology portfolio, and increasing our participation in key process steps across customers' manufacturing roadmaps. I'm excited about the opportunities ahead and confident in our ability to execute, support our customers, and create long-term value for our shareholders. With that, I'll turn the call back to Bob.

Thank you, Guy. I'm very pleased that Guy is stepping into the CEO role and believe this is the right time to execute this transition. Amtech is entering an exciting new phase of growth with strong momentum in our thermal processing solutions business that includes expanded opportunities in advanced packaging and AI infrastructure applications, has a well-established asset-light business model that delivers strong operating results, and has an exceptionally strong balance sheet. I'm excited about the future and confident that Amtech's best days remain ahead of us. Now I'll turn the call over to Tom for more details concerning our Q3 results.

Thank you, Bob. It is my pleasure to review the financials for the fiscal 2026 third quarter. Following the two-year plus transformation led by Bob, the company is at a place where year-over-year revenue comparisons are meaningful. That began with our second quarter and will be my focus on presenting our financial performance today. AI product demand continues to drive our consolidated growth, namely within our TPS segment. TPS revenue of approximately $17.7 million was up nearly 25% year over year, driven by continued strength in AI-related equipment demand and parts and services revenue in support of a growing install base, 20% of TPS revenue in the third quarter of 2026 is related to parts and services. In the third quarter of 2026, AI revenues accounted for more than 40% of TPS segment revenue, up from a 30 handle in the prior year period. Bookings for AI applications remain strong, and we are experiencing both book and ship in the same quarter, as well as book now and ship later on. As a result, our backlog is building for the current quarter as well as into Q1 and Q2 of fiscal 2027. For the third consecutive quarter, company-wide bookings exceeded sales for the period. As mentioned, the SFS segment has lagged, so our growth is being carried by our TPS segment, again, notably for sales related to AI equipment. Total SFS revenues were $4.6 million in the third quarter, down just over 13% from the same period a year ago, primarily as a result of weak demand for PR Hoffman silicon carbide-related products. Moving on to gross margins. Once again, the company's product line rationalization and our focus on growing higher-margin product lines, including AI advanced packaging solutions as well as our recurring parts and services business, are delivering their intended results, particularly as we are also benefiting from greater scale. Overall gross margin as a percentage of sales increased to 50% in the third quarter of 2026, up nearly 400 basis points from 46.7% in the third quarter of 2025. Selling, general and administrative expenses increased approximately $600,000 from the prior year quarter. The increase is primarily due to expanding business activities, compensation including executive transitions, and tax and ITC consulting fees. Research, development and engineering expenses more than doubled from the prior year, but were relatively flat compared to Q2, although we expect this may increase in the coming quarters as we build out our platform to address next gen and tangential opportunities. GAAP net income for the second quarter of fiscal 2026 was approximately $1.7 million, or $0.10 per diluted share. This compares to GAAP net income of approximately $100,000 or $0.01 cent per share for the prior year period. In the third quarter of 2026, we recorded approximately $300,000 in non-cash charges, primarily due to the sublease of our previously closed ACMI Spartanburg facility, related to the disposal of certain fixed assets and an impairment of the ROU lease asset. However, we will be recouping approximately 87% of the monthly future lease expenses from the sublease. The company also recorded approximately $400,000 of stock-based compensation expense in Q3 2026. The company's GAAP net income includes approximately $400,000 of foreign currency exchange losses in the third quarter of 2026, as compared to $100,000 in the prior year period, primarily driven by a weakening U.S. dollar against the Chinese renminbi. Unrestricted cash and cash equivalents at June 30, 2026 were $83.1 million compared to $24.4 million at March 31, 2026, and $17.9 million at December 31, 2025. The increased cash balance at the end of the third quarter is due primarily to the company raising $56.5 million of net proceeds from a $60 million oversubscribed public offering of common stock in June. The company continued to benefit from operational cash generation, working capital optimization, strong accounts receivable collections from customers, and accounts payable management, and generated $1.1 million in cash flow from operations during the fiscal third quarter of 2026. The quarter-end cash balances reflect that. An additional $1.7 million in inventory from the beginning of the fiscal year to accommodate the increased backlog and order flow in our TPS business segment. The company continues to have no debt. As for the $5 million stock repurchase program, the company did not use any cash for this during the quarter, and no shares have been repurchased since the plan was put in place in December of 2025. Now turning to our outlook, for the fourth fiscal quarter ended September 30th, 2026, the company expects revenue to be in the range of $22.5 million to $24 million. With regards to adjusted EBITDA, the company expects to benefit from its operating leverage and consolidated top line growth to deliver adjusted EBITDA margins in the low- to mid-teens. Again, AI-related equipment sales for the Thermal Processing segment are anticipated to drive the majority of our revenue growth and account for well over 40% of the segment sales in the fourth quarter of 2026. At the same time, we remain disciplined on the SFS side of the business, where mature node demand has yet to meaningfully recover, and we are managing costs and working capital accordingly. The outlook provided today during our call and in our earnings 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 U.S. dollar could cause the actual results to differ from expectations. And I will now turn the call over to the operator for questions.

[Operator Instructions] Your first question comes from Craig Irwin with ROTH Capital Partners.

Andrew on for Craig. Congrats on the progress. First one for me. You had a nice jump in a TPS backlog. Can you kind of just help us understand how long you kind of expect that backlog to convert to revenue and the timing there.

Primarily over our fiscal -- we're going into, this is our fiscal fourth quarter, we're expecting it to carry into primarily first quarter and some into the second quarter of our fiscal year '27.

Perfect, understood. And then second from me, just within your existing silicon carbide customers, can you remind us kind of what the mix is currently of EV versus, you know, defense, medical, any other industrial customers and maybe any pockets you do see potential areas for growth?

Yes, I kind of alluded to this. We've seen a marked decline in silicon carbide demand, and I'd say it's really de minimis at this point. And I don't really envision a meaningful recovery in demand for our silicon carbide products. We've really de-emphasized that going forward and restructured the business accordingly and really have the majority of our effort continues to focus on driving growth in our AI infrastructure equipment -- for AI infrastructure equipment, and then, again, developing our specialty chemicals business and our parts and service for the -- in the mature node world. That's where we see the big opportunities. So I really don't -- really we don't focus a lot of time on what's happening in silicon carbide anymore.

All right. Thank you. Your next question comes from Scott Buck with Titan Partners.

Just kind of a follow-up on the backlog. I'm curious how much of that uptick, maybe a few large hyperscaler or OSAT orders versus a more kind of broad step-up? just trying to understand what -- how bumpy that is.

Yes. No, we -- our equipment is agnostic in terms of what -- where it ends up in terms of the -- we're shipping to the OSATs and we're shipping to major OEMs. And it really doesn't matter which hyperscaler it goes into. And frankly, our equipment would also be used across the spectrum, whether you're talking, you know, all the various GPU, TPU applications would all use the same equipment. So we aren't really tied -- we're tied really to overall demand in these infrastructure build-outs, not necessarily specific to any one player or customer.

Okay. That's helpful, Bob. And then I wanted to ask about the Q4 margin guide. It looks like you're guiding revenue flat to up. Yes. But margin came in at 15%, EBITDA margin came in at 15% in the third quarter. But the language suggests kind of low to mid-teens. That seems to imply maybe a margin step down or maybe that's just some conservatism. What -- how should we be thinking about that?

You know, again, it always depends a lot on mix. But, again, when we say low teens, 13 is the first number in the -- isn't that right? It's not 11 or 12. Those aren't teens. So we think of 15 kind of being in that low to mid teens range. That's how we think about it.