NASDAQ:ASYS Amtech Systems Q2 2024 Earnings Report $3.55 +0.03 (+0.85%) As of 04/24/2025 04:00 PM Eastern Earnings History Amtech Systems EPS ResultsActual EPS-$0.01Consensus EPS -$0.13Beat/MissBeat by +$0.12One Year Ago EPSN/AAmtech Systems Revenue ResultsActual Revenue$25.43 millionExpected Revenue$23.00 millionBeat/MissBeat by +$2.43 millionYoY Revenue GrowthN/AAmtech Systems Announcement DetailsQuarterQ2 2024Date5/8/2024TimeN/AConference Call DateWednesday, May 8, 2024Conference Call Time5:00PM ETUpcoming EarningsAmtech Systems' Q2 2025 earnings is scheduled for Tuesday, May 6, 2025, with a conference call scheduled on Wednesday, May 7, 2025 at 5:00 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by Amtech Systems Q2 2024 Earnings Call TranscriptProvided by QuartrMay 8, 2024 ShareLink copied to clipboard.There are 7 speakers on the call. Operator00:00:00Good day, and welcome to the Amtech Systems Fiscal Second Quarter 2024 Earnings 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. Speaker 100:00:19Good afternoon, and thank you for joining us for Antec Systems' fiscal Q2 2024 Conference Call. With me today on the call are Bob Daigle, Chairman and Chief Executive Officer and Lisa Gibbs, Financial Officer. After close of market today, Amtech released its financial results for the fiscal Q2 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 our webcast. Speaker 100:00:58Some 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 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, change in volatility and demand for products the effect of change in 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. Speaker 100:02:04Other risk factors are detailed in our SEC filings, including our Form 10 ks and Forms 10 Q. Additionally, in today's conference call, we will be referring to non GAAP financial measures as we discuss the Q2 financial results. You'll find a reconciliation of these non GAAP measures to our 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 200:02:34Thank you, Erica. So good afternoon, everyone, and thank you for joining Amtech's quarterly conference call. I'm pleased with the progress we're making to improve our cost structure and position the company for strong operating results as markets recover. Revenue of $25,400,000 exceeded the high end of our guidance range and more importantly, we delivered adjusted EBITDA of $800,000 with soft overall demand. The macroeconomic landscape for our target end markets remains mixed. Speaker 200:03:10Within the semiconductor industry, while we continue to experience softness in near term demand for back end packaging applications, We are seeing an uptick in near shoring activities in North America and at Chinese OSATs as they add capacity. Within our materials and substrates end markets, we are seeing a similar balance in puts and takes. Consumables demand, particularly for silicon carbide semiconductor production, has been lumpy due to customer buying patterns and softening in overall electric vehicle demand. However, we are seeing stronger demand for replacement parts in our foundry services. While we await the rebound in demand across broader markets, we continue to focus on optimizing our operations. Speaker 200:04:03Through the measures implemented over the past several quarters, we believe we have better aligned the size of our organization to support current market demand. This has resulted in near term adjusted EBITDA profitability and will help us deliver strong operating results once the broader semiconductor market rebounds. Moreover, we are actively leveraging contract manufacturing partnerships, further enhance our operational efficiencies and provide more flexibility. For example, we showcased our first reflow oven assembled by one of our North American partners at a recent industry trade show. This milestone underscores our goal of creating greater flexibility throughout our manufacturing operations from components and assemblies through complete solutions to optimize our fixed cost structure. Speaker 200:04:57And this positions us well to capitalize on the major investments being made in the semiconductor industry to expand regional manufacturing. We are also building on the actions taken last quarter to refine our pricing to address input cost inflation experienced in recent years. New tool pricing is now more closely aligned with prevailing costs and we are beginning to see the improvement in the margin profile of our backlog. However, it will be several quarters before we see the full benefit due to existing backlog in parts of our business. In summary, we remain focused on optimizing the aspects of our business within our control as we anticipate the next cyclical upturn in our target markets. Speaker 200:05:47The success of our initiatives have resulted in a second consecutive quarter of positive adjusted EBITDA and operating cash flow despite the prevailing softness in the markets we serve. Looking ahead, Amtech remains well positioned to capitalize on several secular trends that will drive demand for our products. Despite near term softness in the electric vehicle market, advanced mobility applications, which include both hybrid as well as full electric vehicles, are expected to remain a primary driver of growth for the industry. Within the broader semiconductor market, our tools play a critical role in the advanced packaging of processors used for an advanced high performance computing as well as artificial intelligence applications. Also with the backdrop of the pandemic and global tensions, sizable investments are being made by governments and industry to build more resilient and secure semiconductor and electronic assembly supply chains. Speaker 200:06:54This will create additional opportunities for our tools across the electronics industry. I'm confident that the strategic initiatives we are implementing to enhance operational efficiency and reduce working capital to generate significant shareholder value as our target markets regain momentum. And with that, I'll turn it over to Lisa for further details on the Q2. Speaker 300:07:20Thank you, Bob. Net revenues increased 2% sequentially and decreased 24% from the Q2 of fiscal 2023. The sequential increase is primarily due to increased consumable sales in our Material and Substrate segment, as customers update their buying patterns and adjust inventory levels. The decrease from prior year is primarily attributable to lower sales across most of our product portfolio due to a slowdown in the broader semiconductor market. We ended the quarter with $44,300,000 in backlog, a decrease of $5,700,000 from December 31, 2023. Speaker 300:07:59Our book to bill ratio as of March 31, 2024 was 0.8:one. As we have commented previously, our lead times were extending too long. And now with our contract manufacturers, our lead times are improving. We are shipping out these equipment that was booked in some cases several months to over a year ago, which negatively impacted margins this quarter due to inflation over the past year. We've improved our lead times and our booking business with better margin profiles. Speaker 300:08:28We are also seeing margin improvements as a result of a product mix within our Material and Substrate segment, which had a one to 1 book to bill this quarter. GAAP gross margin was flat sequentially and decreased compared to the same prior year period. In our semiconductor segment, GAAP gross margin was negatively affected by product mix and increased material costs, both primarily attributed to shipments of our horizontal diffusion furnaces. GAAP gross margin in our Material and Finstrate segment increased sequentially and compared to the same prior year period due primarily to a more favorable product mix with increased consumable sales partially offset by lower equipment sales. Selling, general and administrative or SG and A expenses decreased $300,000 on a sequential basis and decreased $3,200,000 compared to the prior year period. Speaker 300:09:19The sequential decrease is due primarily to reductions in labor expenses, lower commissions and shipping expenses. Compared to the same prior year period, the decrease is due primarily to $1,500,000 of lower acquisition expenses, dollars 800,000 of lower amortization expense as well as reductions in labor expenses and lower commissions and shipping expenses. Research, development and engineering expenses decreased $700,000 sequentially and decreased $600,000 compared to same prior year period due primarily to the timing of purchases related to specific projects in our semiconductor segment. As you saw in our press release, during the Q2 of fiscal 2024, we sold our corporate headquarters building in Tempe, Arizona for a gain of $2,200,000 GAAP net income for the Q2 of fiscal 2024 was $1,000,000 or $0.07 per share. This compares to GAAP net loss of $9,400,000 or $0.66 per share for the preceding quarter and GAAP net income of $3,200,000 or $0.23 per share in the Q2 of fiscal 2023. Speaker 300:10:30Non GAAP net loss, includes an adjustment to remove the gain on our building sale for the Q2 of fiscal 2024 was $200,000 or $0.01 per share. This compares to non GAAP net loss of $600,000 or $0.04 per share for the preceding quarter and non GAAP net income of $2,700,000 or $0.19 per share for the Q2 of fiscal 2023. As a result of our building sale, we generated net cash proceeds of $2,500,000 We used these proceeds to fund approximately $1,200,000 of CapEx during the quarter, primarily for the ongoing build out of BTU's new smaller print building, which we expect to generate approximately $800,000 of annualized savings. The remaining proceeds plus additional cash on hand were used to pay down our revolving line of credit, which was paid in full as of March 31, 2024 were $6,400,000 Our only remaining debt is our term loan with a balance of $4,200,000 as of March 31, 2024. During the 6 months ended March 31, 2024, we generated $5,300,000 in cash provided by operating activities, primarily due to improvements in working capital. Speaker 300:11:52Unrestricted cash and cash equivalents at March 31, 2024 were $13,000,000 compared to $17,000,000 at December 31, 2023. Net cash as of March 31, 2024 was $8,800,000 compared to $7,000,000 as of December 31, 2023. Now turning to our outlook. For the 3rd fiscal quarter ending June 30, 2024, we expect revenues in the range of $22,000,000 to $25,000,000 with adjusted EBITDA nominally positive, which includes some expenses and production downtime associated with the BTU facility move. Although the near term outlook for revenue and earnings remains challenging, we remain confident that the future prospects are strong for both our consumables and equipment serving advanced mobility and advanced packaging applications. Speaker 300:12:42We took actions during the 1st and second quarters of fiscal 2024, which will reduce Amtech's structural costs by approximately $6,000,000 annually and better align product pricing with value. These steps should significantly improve results and enhance profitability through market cycles. Operating results can be significantly impacted positively or by the timing of orders, system shipments, statistical 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. Speaker 300:13:23A portion of Amtech's results is denominated in RMBs as 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. I will now turn the call over to the operator for questions. Operator? Operator00:13:48Thank you. Ladies and gentlemen, we will now begin the question and answer Your first question comes from Mark Miller of Benchmark. Your line is already open. Speaker 400:14:37Just wanted to ask about, are you seeing can you comment about quoting activity? Have you seen any pickup in quoting activity? And if so, where? Speaker 200:14:46Yes. Good afternoon, Mark. Yes, we definitely have seen a very significant uptick on back end processing, so basically the reflow equipment in particular. And I think one of the big changes versus when we provided the update last quarter is things were soft. We were seeing some surface mount applications. Speaker 200:15:11We're now seeing a lot more in the advanced chip packaging area. We're also seeing quoting activity, which involves multiple units where things had softened to the point where it was usually single pieces of equipment. And as I mentioned during the comments, one thing that's been interesting is that some of the quoting activity now is involving, I would say, the localization of manufacturing. We've had some North American quoting in particular that seems tied to supply chain resiliency. That's on the back end. Speaker 200:15:48The other areas where we've seen some strength has been, I'd say, the parts and service side of the business as well, even at the front end, where we're now getting much higher activity than we would have seen 3 months ago. So it's still a mix situation, Mark, but I think at least we're seeing definitely seeing more signs of life than we were 3 months ago. Speaker 400:16:17The improvement in consumable sales, I assume that it impacted margins positively. Can you provide any estimate validated Speaker 300:16:28margins? Well, it did. I mean, certainly, you can see, I guess, on the non GAAP gross margin line improved from about 43% to 45%. So it had a really nice impact and that's the great business for us, right? That's what we were hoping to, get to as we exited the Polishing Equipment business. Speaker 400:16:55Hello? Speaker 300:16:58Are you there, Mark? Speaker 400:16:59Yes. I'm here. You just went out for a few seconds. Speaker 300:17:03Did you hear my answer or do you want me to repeat it? Speaker 400:17:06No, I heard most of it. So, thanks. Speaker 300:17:10Okay. All right. Thank you, Mark. Operator00:17:13Your next question comes from Kevin Garrigan of Westpark Capital. Your line is already open. Speaker 500:17:24Yes. Hey, team. Great speaking with you guys again. Regarding softness across the broader market, are you seeing any light at the end of the tunnel? And do you think the recovery would be a snap back in demand? Speaker 500:17:37Or is it kind of more of a U shape? Speaker 200:17:41Yes. It's interesting, Kevin, in that. Again, we read the same things you're reading about the memory, for example, bookings have been quite strong, pricing has firmed up on the memory side of things, mostly related to AI. So I do think at least in applications related to AI, we're likely to see that industry come back a little bit stronger towards the end of the year, early next year. It's always a little bit complicated for us. Speaker 200:18:16It's kind of a in the case of consumables, it tends to be a little bit more real time in that. Obviously as volumes pick up, we tend to see that flow through pretty quickly. It's a little bit trickier with equipment because now you have to factor in utilization rates at the customer. And typically, they need to trigger utilization rates, let's say, in the 80 plus percent range before they start to increase equipment orders. So I think timing is a little bit trickier to predict in those instances. Speaker 500:18:57Yes. No, that makes a ton of sense. Okay, perfect. And then just as a quick follow-up. Lisa, I think you said in your prepared remarks that lead times are improving. Speaker 500:19:08Can you just remind us what your ideal lead times are and when you kind of see them getting back to normal? Speaker 300:19:15Sure. So it can vary by product. The fact that the equipment that Bob was referencing, those lead times can be 4 to 6 weeks. Some of the equipment we talked about this quarter that negatively impacted our margins like the horizontal diffusion furnace. We had lead times of over a year on that equipment. Speaker 300:19:36We've certainly brought that down. And on our high temp belt furnaces, I would say that's come down to a handful of months now. Yes. Speaker 200:19:44And I'd say even on horizontal diffusion furnaces with supply chain lead times, probably a more normalized time frame would be, let's say, 4 to 6 months, maybe closer to, yes, say, 5 to 6 months, if the backlog is under at a reasonable level. But we're going to we're moving into a mode frankly with the things we've done from an operational stand point, leveraging subcontractors where our goal is really to drive our cycle times down to minimum based on supply chain, how long it takes to get in our components to manufacture with the idea that part of the margin headwinds we had on some of this equipment pain, partly because, yes, we quoted it over a year ago. So we've got to get our cycles time cycle times down so that make sure our pricing reflects current cost conditions more effectively. Speaker 500:20:56Okay, got it. Yes, that makes a ton of sense. Okay, perfect. Thank you. Speaker 300:21:01Thank you, Kevin. Operator00:21:05Your next question comes from Craig Irwin of ROTHMKM. Your line is already open. Speaker 600:21:16Good afternoon and thanks for taking my questions. So I was hoping you could maybe comment a little bit about the silicon carbide market, the wafers that are being produced today. There's a tremendous amount of interest in 8 inches wafers, Speaker 200:21:32but most of Speaker 600:21:33the production is really 6 inches today. Can you maybe tell us if there's an opportunity to offer a premium product on the Hoffman side serving the 8 inches market? Is there potentially another way to generate additional incremental value for Hoffman out of this business? How do you see yourselves positioned given your impeccable positioning on 6 inches providing most of the cassettes that were used out there? Speaker 200:22:08Yes. So and as you point out, most of the market is at 6 inches today. And again, I do think and it depends on it really does depend on the customer. There's not one generic answer to that, Craig. But again, we're trying to position ourselves so that to the extent we can play in 8 inches that we can, where possible, get some incremental value. Speaker 200:22:34But it will very much depend on who what the customer is and what their core what their base technology is in the CMP area. Speaker 600:22:45Okay, excellent. And then on the furnace side, I understand that there's Bruce has a very unique product for not just traditional power semiconductor production, but specifically for silicon carbide, given the much higher temperatures that the processes are run at. Can you maybe give us a little bit of color on that product, what the pipeline looks like? It seems that even though there's a bit of an air pocket in the market with EVs and some of the industrial equipment in China, that there's still a pretty large amount of interest in facility construction. There's big plans, big facilities on the drawing board. Speaker 600:23:33Any color that you could share with us there about your potential activity? Speaker 200:23:37Yes. So the demand requirements that we received from some key customers is fairly significant that there's some pretty large opportunities going forward. As you point out, timing may depend a bit on how much utilization there is in the industry. It's with a little bit of the frankly the drop off and more so expectations of EV. It may slow things down a little bit in the industry. Speaker 200:24:13But ultimately, at least the view I have is the industry is going to migrate continue to migrate pretty aggressively towards silicon carbide because of the efficiency of the inverters. So I think some of what's been going on in terms of a little bit of the slowdown in EV market may affect timing, but I don't think it changes the trajectory we're on. I think the wild card is also because we do participate we participate in the EV, but we also participate pretty significantly in the power electronics for hybrid electric vehicles. And in particular, I'd say the direct bond copper furnaces that are used for these silicon based IGBTs are fairly sizable part of our business at BTU. With this pivot maybe in greater emphasis on HEV in the near term that could present additional opportunities for us in the silicon based power module packaging. Speaker 600:25:27Understood. So you've been doing a really good job managing cash, right, getting to a net cash position this quarter. Usually, when there's an air pocket like we've seen sort of in the macro in silicon carbide, it's a good time to continue conversations around acquisitions. How active are you on the M and A side? Know there are some very interesting properties out there, both on the materials and consumables side, that actually directly play in to silicon carbide and traditional power semiconductor markets. Speaker 600:26:05How likely are we to see you step up and maybe grab something or consolidate something? Is this a priority today? Speaker 200:26:14I'd say our near term priority was obviously around the goal of being cash flow positive with the current market realities and a sluggish industry. But ultimately, we're a growth company. Ultimately, we are see a tremendous opportunity in the power electronics area and in particular silicon carbide. So it's an area we are spending time. I can't really say too much, Craig, about what the timing might be. Speaker 200:26:55But in terms of it being a strategic priority for us in terms of trying to bring more breadth, more exposure, more growth drivers in this area. It's definitely a priority for the company. Speaker 600:27:10Okay. Excellent. Excellent. And then last question, if I may. You did exceed your revenue guidance in the quarter. Speaker 600:27:18It seems that your visibility is pretty good at least in the short term. Can you maybe comment about anything that's changing materially for Speaker 200:27:33the back end of the year? Speaker 600:27:38Is there maybe a sentiment that investors might appreciate a little color around that you could give us to help us understand sort of where this visibility reaches out to, right? Do you have visibility through December? And how would we see that play out? Speaker 200:28:06Yes. So I think, again, we have to talk about the various segments. So if you look at in the furnace area, whether it's horizontal diffusion furnace or the ovens we're providing for things like direct bond copper applications. Again, that's a high percentage of our backlog is in that area and takes us out through the December quarter. If you look at the consumables part of business, that tends to book and ship even within the same quarter, relatively short lead times and will tend to get that out pretty quickly. Speaker 200:28:43So there's not the visibility tends to be more medium long term forecast we get from our customer base. And again, that's going to depend on ultimately market demand to drive that. And that's also true, frankly, the parts and service, we've seen quite a bit of a pickup in recent weeks months in terms of activity there, signs of life in the industry. But it's not like we have great visibility beyond a month or 2 in that area because those tend to be pretty short lead time items. And as Lisa mentioned earlier, even on the back end packaging equipment reflow, surface mount and as well as chip packaging, we're our lead times are 4 to 6 weeks. Speaker 200:29:33So there's not really an incentive, frankly, for customers to book things out 6, 9 months ahead of time. They don't need to. They can get equipment pretty quickly from us. So it's really a mixed bag. I'd say where we have the most visibility is really in the furnace area because of the long lead times historically. Speaker 300:29:53Yes. And Craig, I would just add on the gross margin side, we expect a fairly similar product mix going into Q3. So I think we'll see some of these headwinds that we saw with material costs kind of repeated in Q3. We do expect incremental improvements in Q4 and into fiscal Q1, as we're shipping out some of this older backlog and then beginning to ship out the newer quoted backlog that has the higher margin quotes that we've been using. Speaker 600:30:27Thank you for that, Lisa. I'll take the rest of my questions offline. Congratulations on the revenue results. It's good to see you guys executing. Speaker 300:30:36Great. Thank you, Chris. Thank you, Chris. Operator00:30:41There are no further questions at this time. I would hand over the call to Bob Daigle, CEO for closing comments. Please proceed. Speaker 200:30:50Well, thank you again for joining our conference call and I look forward to updating everybody on progress we're making in the months to come. Operator00:31:01Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallAmtech Systems Q2 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) Amtech Systems Earnings HeadlinesAmtech Systems (NASDAQ:ASYS) investors are sitting on a loss of 62% if they invested three years agoApril 20, 2025 | finance.yahoo.comAmtech Stock Plummets 31% YTD: Should Investors Hold or Fold?April 14, 2025 | msn.comWarning: “DOGE Collapse” imminentElon Strikes Back You may already sense that the tide is turning against Elon Musk and DOGE. Just this week, President Trump promised to buy a Tesla to help support Musk in the face of a boycott against his company. But according to one research group, with connections to the Pentagon and the U.S. government, Elon's preparing to strike back in a much bigger way in the days ahead.April 25, 2025 | Altimetry (Ad)Amtech cuts Q2 revenue view to $15M-$16M from $21M-$23MApril 10, 2025 | markets.businessinsider.comAmtech Systems Shares Drop 13% After 2Q Outlook CutApril 9, 2025 | marketwatch.comAmtech Provides Second Quarter Fiscal 2025 Financial Guidance UpdateApril 9, 2025 | businesswire.comSee More Amtech Systems Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Amtech Systems? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Amtech Systems and other key companies, straight to your email. Email Address About Amtech SystemsAmtech Systems (NASDAQ:ASYS) manufactures and sells capital equipment and related consumables for use in fabricating silicon carbide (SiC), silicon power devices, analog and discrete devices, electronic assemblies, and light-emitting diodes (LEDs) worldwide. The company operates through Semiconductor and Material and Substrate segments. The Semiconductor segment designs, manufactures, sells, and services thermal processing equipment, including solder reflow ovens, horizontal diffusion furnaces, and custom high-temp belt furnaces for use by semiconductor, electronics, and electro/mechanical assembly manufacturers; and diffusion and reflow thermal systems, as well as wafer cleaning equipment and related services. The Material and Substrate segment manufactures and sells consumables and machinery for lapping and polishing of materials, such as silicon wafers for semiconductor products; sapphire substrates for LED lighting and mobile devices; silicon carbide wafers for LED and power device applications; various glass and silica components for 3D image transmission; quartz and ceramic components for telecommunications devices; and medical device components, and optical and photonics applications. It also offers substrate products comprising of double-sided wafer cleaning system, entegrity head tester, substrate carrier, substrate polishing templates, double-sided lapping and polishing machines, single-sided polisher, and substrate process chemicals. The company sells its products through sales personnel, as well as a network of independent sales representatives and distributors. Amtech Systems, Inc. was incorporated in 1981 and is headquartered in Tempe, Arizona.View Amtech Systems ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Tesla Earnings Miss, But Musk Refocuses and Bulls ReactQualcomm’s Range Narrows Ahead of Earnings as Bulls Step InWhy It May Be Time to Buy CrowdStrike Stock Heading Into EarningsCan IBM’s Q1 Earnings Spark a Breakout for the Stock? 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There are 7 speakers on the call. Operator00:00:00Good day, and welcome to the Amtech Systems Fiscal Second Quarter 2024 Earnings 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. Speaker 100:00:19Good afternoon, and thank you for joining us for Antec Systems' fiscal Q2 2024 Conference Call. With me today on the call are Bob Daigle, Chairman and Chief Executive Officer and Lisa Gibbs, Financial Officer. After close of market today, Amtech released its financial results for the fiscal Q2 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 our webcast. Speaker 100:00:58Some 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 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, change in volatility and demand for products the effect of change in 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. Speaker 100:02:04Other risk factors are detailed in our SEC filings, including our Form 10 ks and Forms 10 Q. Additionally, in today's conference call, we will be referring to non GAAP financial measures as we discuss the Q2 financial results. You'll find a reconciliation of these non GAAP measures to our 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 200:02:34Thank you, Erica. So good afternoon, everyone, and thank you for joining Amtech's quarterly conference call. I'm pleased with the progress we're making to improve our cost structure and position the company for strong operating results as markets recover. Revenue of $25,400,000 exceeded the high end of our guidance range and more importantly, we delivered adjusted EBITDA of $800,000 with soft overall demand. The macroeconomic landscape for our target end markets remains mixed. Speaker 200:03:10Within the semiconductor industry, while we continue to experience softness in near term demand for back end packaging applications, We are seeing an uptick in near shoring activities in North America and at Chinese OSATs as they add capacity. Within our materials and substrates end markets, we are seeing a similar balance in puts and takes. Consumables demand, particularly for silicon carbide semiconductor production, has been lumpy due to customer buying patterns and softening in overall electric vehicle demand. However, we are seeing stronger demand for replacement parts in our foundry services. While we await the rebound in demand across broader markets, we continue to focus on optimizing our operations. Speaker 200:04:03Through the measures implemented over the past several quarters, we believe we have better aligned the size of our organization to support current market demand. This has resulted in near term adjusted EBITDA profitability and will help us deliver strong operating results once the broader semiconductor market rebounds. Moreover, we are actively leveraging contract manufacturing partnerships, further enhance our operational efficiencies and provide more flexibility. For example, we showcased our first reflow oven assembled by one of our North American partners at a recent industry trade show. This milestone underscores our goal of creating greater flexibility throughout our manufacturing operations from components and assemblies through complete solutions to optimize our fixed cost structure. Speaker 200:04:57And this positions us well to capitalize on the major investments being made in the semiconductor industry to expand regional manufacturing. We are also building on the actions taken last quarter to refine our pricing to address input cost inflation experienced in recent years. New tool pricing is now more closely aligned with prevailing costs and we are beginning to see the improvement in the margin profile of our backlog. However, it will be several quarters before we see the full benefit due to existing backlog in parts of our business. In summary, we remain focused on optimizing the aspects of our business within our control as we anticipate the next cyclical upturn in our target markets. Speaker 200:05:47The success of our initiatives have resulted in a second consecutive quarter of positive adjusted EBITDA and operating cash flow despite the prevailing softness in the markets we serve. Looking ahead, Amtech remains well positioned to capitalize on several secular trends that will drive demand for our products. Despite near term softness in the electric vehicle market, advanced mobility applications, which include both hybrid as well as full electric vehicles, are expected to remain a primary driver of growth for the industry. Within the broader semiconductor market, our tools play a critical role in the advanced packaging of processors used for an advanced high performance computing as well as artificial intelligence applications. Also with the backdrop of the pandemic and global tensions, sizable investments are being made by governments and industry to build more resilient and secure semiconductor and electronic assembly supply chains. Speaker 200:06:54This will create additional opportunities for our tools across the electronics industry. I'm confident that the strategic initiatives we are implementing to enhance operational efficiency and reduce working capital to generate significant shareholder value as our target markets regain momentum. And with that, I'll turn it over to Lisa for further details on the Q2. Speaker 300:07:20Thank you, Bob. Net revenues increased 2% sequentially and decreased 24% from the Q2 of fiscal 2023. The sequential increase is primarily due to increased consumable sales in our Material and Substrate segment, as customers update their buying patterns and adjust inventory levels. The decrease from prior year is primarily attributable to lower sales across most of our product portfolio due to a slowdown in the broader semiconductor market. We ended the quarter with $44,300,000 in backlog, a decrease of $5,700,000 from December 31, 2023. Speaker 300:07:59Our book to bill ratio as of March 31, 2024 was 0.8:one. As we have commented previously, our lead times were extending too long. And now with our contract manufacturers, our lead times are improving. We are shipping out these equipment that was booked in some cases several months to over a year ago, which negatively impacted margins this quarter due to inflation over the past year. We've improved our lead times and our booking business with better margin profiles. Speaker 300:08:28We are also seeing margin improvements as a result of a product mix within our Material and Substrate segment, which had a one to 1 book to bill this quarter. GAAP gross margin was flat sequentially and decreased compared to the same prior year period. In our semiconductor segment, GAAP gross margin was negatively affected by product mix and increased material costs, both primarily attributed to shipments of our horizontal diffusion furnaces. GAAP gross margin in our Material and Finstrate segment increased sequentially and compared to the same prior year period due primarily to a more favorable product mix with increased consumable sales partially offset by lower equipment sales. Selling, general and administrative or SG and A expenses decreased $300,000 on a sequential basis and decreased $3,200,000 compared to the prior year period. Speaker 300:09:19The sequential decrease is due primarily to reductions in labor expenses, lower commissions and shipping expenses. Compared to the same prior year period, the decrease is due primarily to $1,500,000 of lower acquisition expenses, dollars 800,000 of lower amortization expense as well as reductions in labor expenses and lower commissions and shipping expenses. Research, development and engineering expenses decreased $700,000 sequentially and decreased $600,000 compared to same prior year period due primarily to the timing of purchases related to specific projects in our semiconductor segment. As you saw in our press release, during the Q2 of fiscal 2024, we sold our corporate headquarters building in Tempe, Arizona for a gain of $2,200,000 GAAP net income for the Q2 of fiscal 2024 was $1,000,000 or $0.07 per share. This compares to GAAP net loss of $9,400,000 or $0.66 per share for the preceding quarter and GAAP net income of $3,200,000 or $0.23 per share in the Q2 of fiscal 2023. Speaker 300:10:30Non GAAP net loss, includes an adjustment to remove the gain on our building sale for the Q2 of fiscal 2024 was $200,000 or $0.01 per share. This compares to non GAAP net loss of $600,000 or $0.04 per share for the preceding quarter and non GAAP net income of $2,700,000 or $0.19 per share for the Q2 of fiscal 2023. As a result of our building sale, we generated net cash proceeds of $2,500,000 We used these proceeds to fund approximately $1,200,000 of CapEx during the quarter, primarily for the ongoing build out of BTU's new smaller print building, which we expect to generate approximately $800,000 of annualized savings. The remaining proceeds plus additional cash on hand were used to pay down our revolving line of credit, which was paid in full as of March 31, 2024 were $6,400,000 Our only remaining debt is our term loan with a balance of $4,200,000 as of March 31, 2024. During the 6 months ended March 31, 2024, we generated $5,300,000 in cash provided by operating activities, primarily due to improvements in working capital. Speaker 300:11:52Unrestricted cash and cash equivalents at March 31, 2024 were $13,000,000 compared to $17,000,000 at December 31, 2023. Net cash as of March 31, 2024 was $8,800,000 compared to $7,000,000 as of December 31, 2023. Now turning to our outlook. For the 3rd fiscal quarter ending June 30, 2024, we expect revenues in the range of $22,000,000 to $25,000,000 with adjusted EBITDA nominally positive, which includes some expenses and production downtime associated with the BTU facility move. Although the near term outlook for revenue and earnings remains challenging, we remain confident that the future prospects are strong for both our consumables and equipment serving advanced mobility and advanced packaging applications. Speaker 300:12:42We took actions during the 1st and second quarters of fiscal 2024, which will reduce Amtech's structural costs by approximately $6,000,000 annually and better align product pricing with value. These steps should significantly improve results and enhance profitability through market cycles. Operating results can be significantly impacted positively or by the timing of orders, system shipments, statistical 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. Speaker 300:13:23A portion of Amtech's results is denominated in RMBs as 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. I will now turn the call over to the operator for questions. Operator? Operator00:13:48Thank you. Ladies and gentlemen, we will now begin the question and answer Your first question comes from Mark Miller of Benchmark. Your line is already open. Speaker 400:14:37Just wanted to ask about, are you seeing can you comment about quoting activity? Have you seen any pickup in quoting activity? And if so, where? Speaker 200:14:46Yes. Good afternoon, Mark. Yes, we definitely have seen a very significant uptick on back end processing, so basically the reflow equipment in particular. And I think one of the big changes versus when we provided the update last quarter is things were soft. We were seeing some surface mount applications. Speaker 200:15:11We're now seeing a lot more in the advanced chip packaging area. We're also seeing quoting activity, which involves multiple units where things had softened to the point where it was usually single pieces of equipment. And as I mentioned during the comments, one thing that's been interesting is that some of the quoting activity now is involving, I would say, the localization of manufacturing. We've had some North American quoting in particular that seems tied to supply chain resiliency. That's on the back end. Speaker 200:15:48The other areas where we've seen some strength has been, I'd say, the parts and service side of the business as well, even at the front end, where we're now getting much higher activity than we would have seen 3 months ago. So it's still a mix situation, Mark, but I think at least we're seeing definitely seeing more signs of life than we were 3 months ago. Speaker 400:16:17The improvement in consumable sales, I assume that it impacted margins positively. Can you provide any estimate validated Speaker 300:16:28margins? Well, it did. I mean, certainly, you can see, I guess, on the non GAAP gross margin line improved from about 43% to 45%. So it had a really nice impact and that's the great business for us, right? That's what we were hoping to, get to as we exited the Polishing Equipment business. Speaker 400:16:55Hello? Speaker 300:16:58Are you there, Mark? Speaker 400:16:59Yes. I'm here. You just went out for a few seconds. Speaker 300:17:03Did you hear my answer or do you want me to repeat it? Speaker 400:17:06No, I heard most of it. So, thanks. Speaker 300:17:10Okay. All right. Thank you, Mark. Operator00:17:13Your next question comes from Kevin Garrigan of Westpark Capital. Your line is already open. Speaker 500:17:24Yes. Hey, team. Great speaking with you guys again. Regarding softness across the broader market, are you seeing any light at the end of the tunnel? And do you think the recovery would be a snap back in demand? Speaker 500:17:37Or is it kind of more of a U shape? Speaker 200:17:41Yes. It's interesting, Kevin, in that. Again, we read the same things you're reading about the memory, for example, bookings have been quite strong, pricing has firmed up on the memory side of things, mostly related to AI. So I do think at least in applications related to AI, we're likely to see that industry come back a little bit stronger towards the end of the year, early next year. It's always a little bit complicated for us. Speaker 200:18:16It's kind of a in the case of consumables, it tends to be a little bit more real time in that. Obviously as volumes pick up, we tend to see that flow through pretty quickly. It's a little bit trickier with equipment because now you have to factor in utilization rates at the customer. And typically, they need to trigger utilization rates, let's say, in the 80 plus percent range before they start to increase equipment orders. So I think timing is a little bit trickier to predict in those instances. Speaker 500:18:57Yes. No, that makes a ton of sense. Okay, perfect. And then just as a quick follow-up. Lisa, I think you said in your prepared remarks that lead times are improving. Speaker 500:19:08Can you just remind us what your ideal lead times are and when you kind of see them getting back to normal? Speaker 300:19:15Sure. So it can vary by product. The fact that the equipment that Bob was referencing, those lead times can be 4 to 6 weeks. Some of the equipment we talked about this quarter that negatively impacted our margins like the horizontal diffusion furnace. We had lead times of over a year on that equipment. Speaker 300:19:36We've certainly brought that down. And on our high temp belt furnaces, I would say that's come down to a handful of months now. Yes. Speaker 200:19:44And I'd say even on horizontal diffusion furnaces with supply chain lead times, probably a more normalized time frame would be, let's say, 4 to 6 months, maybe closer to, yes, say, 5 to 6 months, if the backlog is under at a reasonable level. But we're going to we're moving into a mode frankly with the things we've done from an operational stand point, leveraging subcontractors where our goal is really to drive our cycle times down to minimum based on supply chain, how long it takes to get in our components to manufacture with the idea that part of the margin headwinds we had on some of this equipment pain, partly because, yes, we quoted it over a year ago. So we've got to get our cycles time cycle times down so that make sure our pricing reflects current cost conditions more effectively. Speaker 500:20:56Okay, got it. Yes, that makes a ton of sense. Okay, perfect. Thank you. Speaker 300:21:01Thank you, Kevin. Operator00:21:05Your next question comes from Craig Irwin of ROTHMKM. Your line is already open. Speaker 600:21:16Good afternoon and thanks for taking my questions. So I was hoping you could maybe comment a little bit about the silicon carbide market, the wafers that are being produced today. There's a tremendous amount of interest in 8 inches wafers, Speaker 200:21:32but most of Speaker 600:21:33the production is really 6 inches today. Can you maybe tell us if there's an opportunity to offer a premium product on the Hoffman side serving the 8 inches market? Is there potentially another way to generate additional incremental value for Hoffman out of this business? How do you see yourselves positioned given your impeccable positioning on 6 inches providing most of the cassettes that were used out there? Speaker 200:22:08Yes. So and as you point out, most of the market is at 6 inches today. And again, I do think and it depends on it really does depend on the customer. There's not one generic answer to that, Craig. But again, we're trying to position ourselves so that to the extent we can play in 8 inches that we can, where possible, get some incremental value. Speaker 200:22:34But it will very much depend on who what the customer is and what their core what their base technology is in the CMP area. Speaker 600:22:45Okay, excellent. And then on the furnace side, I understand that there's Bruce has a very unique product for not just traditional power semiconductor production, but specifically for silicon carbide, given the much higher temperatures that the processes are run at. Can you maybe give us a little bit of color on that product, what the pipeline looks like? It seems that even though there's a bit of an air pocket in the market with EVs and some of the industrial equipment in China, that there's still a pretty large amount of interest in facility construction. There's big plans, big facilities on the drawing board. Speaker 600:23:33Any color that you could share with us there about your potential activity? Speaker 200:23:37Yes. So the demand requirements that we received from some key customers is fairly significant that there's some pretty large opportunities going forward. As you point out, timing may depend a bit on how much utilization there is in the industry. It's with a little bit of the frankly the drop off and more so expectations of EV. It may slow things down a little bit in the industry. Speaker 200:24:13But ultimately, at least the view I have is the industry is going to migrate continue to migrate pretty aggressively towards silicon carbide because of the efficiency of the inverters. So I think some of what's been going on in terms of a little bit of the slowdown in EV market may affect timing, but I don't think it changes the trajectory we're on. I think the wild card is also because we do participate we participate in the EV, but we also participate pretty significantly in the power electronics for hybrid electric vehicles. And in particular, I'd say the direct bond copper furnaces that are used for these silicon based IGBTs are fairly sizable part of our business at BTU. With this pivot maybe in greater emphasis on HEV in the near term that could present additional opportunities for us in the silicon based power module packaging. Speaker 600:25:27Understood. So you've been doing a really good job managing cash, right, getting to a net cash position this quarter. Usually, when there's an air pocket like we've seen sort of in the macro in silicon carbide, it's a good time to continue conversations around acquisitions. How active are you on the M and A side? Know there are some very interesting properties out there, both on the materials and consumables side, that actually directly play in to silicon carbide and traditional power semiconductor markets. Speaker 600:26:05How likely are we to see you step up and maybe grab something or consolidate something? Is this a priority today? Speaker 200:26:14I'd say our near term priority was obviously around the goal of being cash flow positive with the current market realities and a sluggish industry. But ultimately, we're a growth company. Ultimately, we are see a tremendous opportunity in the power electronics area and in particular silicon carbide. So it's an area we are spending time. I can't really say too much, Craig, about what the timing might be. Speaker 200:26:55But in terms of it being a strategic priority for us in terms of trying to bring more breadth, more exposure, more growth drivers in this area. It's definitely a priority for the company. Speaker 600:27:10Okay. Excellent. Excellent. And then last question, if I may. You did exceed your revenue guidance in the quarter. Speaker 600:27:18It seems that your visibility is pretty good at least in the short term. Can you maybe comment about anything that's changing materially for Speaker 200:27:33the back end of the year? Speaker 600:27:38Is there maybe a sentiment that investors might appreciate a little color around that you could give us to help us understand sort of where this visibility reaches out to, right? Do you have visibility through December? And how would we see that play out? Speaker 200:28:06Yes. So I think, again, we have to talk about the various segments. So if you look at in the furnace area, whether it's horizontal diffusion furnace or the ovens we're providing for things like direct bond copper applications. Again, that's a high percentage of our backlog is in that area and takes us out through the December quarter. If you look at the consumables part of business, that tends to book and ship even within the same quarter, relatively short lead times and will tend to get that out pretty quickly. Speaker 200:28:43So there's not the visibility tends to be more medium long term forecast we get from our customer base. And again, that's going to depend on ultimately market demand to drive that. And that's also true, frankly, the parts and service, we've seen quite a bit of a pickup in recent weeks months in terms of activity there, signs of life in the industry. But it's not like we have great visibility beyond a month or 2 in that area because those tend to be pretty short lead time items. And as Lisa mentioned earlier, even on the back end packaging equipment reflow, surface mount and as well as chip packaging, we're our lead times are 4 to 6 weeks. Speaker 200:29:33So there's not really an incentive, frankly, for customers to book things out 6, 9 months ahead of time. They don't need to. They can get equipment pretty quickly from us. So it's really a mixed bag. I'd say where we have the most visibility is really in the furnace area because of the long lead times historically. Speaker 300:29:53Yes. And Craig, I would just add on the gross margin side, we expect a fairly similar product mix going into Q3. So I think we'll see some of these headwinds that we saw with material costs kind of repeated in Q3. We do expect incremental improvements in Q4 and into fiscal Q1, as we're shipping out some of this older backlog and then beginning to ship out the newer quoted backlog that has the higher margin quotes that we've been using. Speaker 600:30:27Thank you for that, Lisa. I'll take the rest of my questions offline. Congratulations on the revenue results. It's good to see you guys executing. Speaker 300:30:36Great. Thank you, Chris. Thank you, Chris. Operator00:30:41There are no further questions at this time. I would hand over the call to Bob Daigle, CEO for closing comments. Please proceed. Speaker 200:30:50Well, thank you again for joining our conference call and I look forward to updating everybody on progress we're making in the months to come. Operator00:31:01Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect.Read morePowered by