Amtech Systems (NASDAQ:ASYS) Q3 2026 Earnings Call

0:00 Good day and thank you for standing by everyone and welcome to the Amtech Systems Fiscal twenty twenty six Third Quarter Earnings Conference Call. All participants will be in listen only mode. Please note this event is being recorded.

0:31 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 twenty twenty six third quarter conference call and webcast. With me on the call today are Bob Dale, Chairman and Chief Executive Officer Guy Scheckter, President and Chief Operating Officer and Tom Stable, Chief Financial Officer. After close of market today, Amtech released its financial results for the third quarter of fiscal twenty twenty six. The earnings release is posted on the company's website at www.amtechsystems.com in the Investors 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 in our public filings cover this call and the webcast.

1:28 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 Investors 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 could 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 technologies 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.

2:22 Other risk factors are detailed in our SEC filings, including our Form 10 ks 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

2:37 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. 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 $22,400,000 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.

3:31 AI related revenue for our Thermal Process Solutions 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% for the quarter and adjusted EBITDA of $3,300,000 approached 15% of sales. The combination of higher revenue, margins and disciplined execution also continued to support strong cash generation. Our thermal processing solutions 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.

4:27 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. Capsule equipment capable of delivering high yields, excellent throughput and highly repeatable process performance remains essential to supporting this growth.

5:14 Demand for our advanced packaging equipment and AI server board assembly solutions remains exceptionally strong due to our differentiated capabilities, including TruFlat 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 one. Despite our relatively short lead times, we are seeing a significant increase in bookings scheduled for shipment in future quarters providing confidence that AI driven demand will continue to be a meaningful growth driver.

6:01 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.

6:48 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.

7:40 At Intrepix, 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.

8:00 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 $83,100,000 of cash, including $56,500,000 of net proceeds from an oversubscribed public offering of nearly 3,000,000 shares of common stock, which was essentially done at market price. Excluding the capital raise, cash at the end of the quarter was up $2,200,000 from the prior quarter and $11,000,000 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.

9:00 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 Schecter will assume the position of Chief Executive Officer. Guy has also been appointed to our company's Board of Directors.

9:26 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. I will now turn the call over to Guy so he can introduce himself and provide some additional background.

10:15 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 twenty five years of leadership experience in semiconductors and advanced packaging equipment industries, including product management, operation 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.

11:02 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.

11:49 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.

12:35 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 twenty twenty six 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 $17,700,000 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 installed base.

13:34 20% of TPS revenue in the third quarter of twenty twenty six is related to parts and services. In the third quarter of twenty twenty six, AI revenues accounted for more than 40% of TPS segment revenue, up from a 30s 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.

14:05 As a result, our backlog is building for the current quarter, as well as into Q1 and Q2 of fiscal twenty twenty seven. For the third consecutive quarter, companywide 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.

14:32 Total SFS revenues were $4,600,000 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.

14:49 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.

15:13 Overall gross margins as a percentage of sales increased to 50% in the third quarter of twenty twenty six, up nearly 400 basis points from 46.7% in the third quarter of twenty twenty five. 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 IT consulting fees.

15:47 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 twenty twenty six was approximately 1,700,000 or $0.10 per diluted share. This compares to GAAP net income of approximately $100,000 or $01 per share for the prior year period.

16:27 In the third quarter of twenty twenty six, 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.

16:50 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 twenty twenty six.

17:11 The company's GAAP net income includes approximately $400,000 of foreign currency exchange losses in the third quarter of twenty twenty six, as compared to $100,000 in the prior year period, primarily driven by a weakening U. S. Dollar against the Chinese renminbi.

17:31 Unrestricted cash and cash equivalents at 06/30/2026 were 83,100,000 compared to $24,400,000 at 03/31/2026 and $17,900,000 at 12/31/2025. The increased cash balance at the end of the third quarter is due primarily to the company raising $56,500,000 of net proceeds from a $60,000,000 oversubscribed public offering of common stock in June.

18:05 The company continued to benefit from operational cash generation, working capital optimization, strong accounts receivable collections from customers and accounts payable management and generated 1,100,000 in cash flow from operations during the fiscal third quarter of twenty twenty six. The quarter end cash balances reflects

18:32 an additional 1,700,000 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 $5,000,000 stock repurchase program, the company did not use any cash for this during the quarter and no shares have been repurchased since Japan was put in place in December 2025.

19:04 Now turning to our outlook, for the fourth fiscal quarter ended 09/30/2026, the company expects revenue to be in the range of 22,500,000 to $24,000,000 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.

19:40 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 twenty twenty six. 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.

20:10 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 US dollar could cause the actual results to differ from expectations. And I will now turn the call over to the operator for questions.

20:37 We will now begin the question and answer session. Your first question comes from Craig Irwin with ROTH Capital Partners.

21:05 Hey guys, Andrew on for Craig. Congrats on the progress. First one for me, He had a nice jump in 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?

21:25 Yeah, 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 '27.

21:44 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?

22:07 Yeah, I kind of alluded to this. We've seen a market 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 deemphasized 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

22:46 for AI infrastructure equipment. And then again, developing our specialty chemicals business and our parts and service for the in the mature North world. That's where we see the big opportunities. So I really don't, you know, really we don't focus a lot of time on what's happening in silicon carbide anymore. Understood. Well, thanks for taking my questions and I'll hop back in the queue. All right, thank you. Your next question comes from Scott Buck with Time and Partners. Hi, good afternoon guys. Just kind of a follow-up on the backlog. I'm curious how much of that uptake is maybe a few large hyperscaler or OSAT orders versus a more kind of broad step up?

23:38 Just trying to understand what Yeah, well you know, how healthy that is. So we yes, no, equipment is agnostic in terms of what where it ends up in terms of the we're shipping to the OSATs or shipping to major OEMs. And it really doesn't matter which hyperscaler goes into. And frankly our equipment also be used across the spectrum where you're whether you're talking you know, the various GPU, TPU applications would all use the same equipment. So we don't, we aren't really tied. We're tied really to overall demand in these infrastructure build outs, not necessarily specific to any one player customer.

24:32 Okay, that's helpful, Bob. And then I wanted to ask about the Q4 margin guide. It looks like you're guiding revenue, you know, flat to up. 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 are 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 team. Is that right? It's not 11 or 12.

25:17 Those aren't teens. We think of 15 kind of being in that low to mid teens range. That's how we think about it. Okay. Nitpicking here, I guess. And then last, was hoping to maybe get a little bit more color on capital deployment given the balance sheet strength. You know, what does the M and A environment look like? Would something make sense? Or how do you think about, you know, kind of prioritizing things organically? Yeah, so, yeah, so our, you know, we've got these, I think very strong tailwinds obviously associated with AI infrastructure build outs.

26:02 We would, our vision for the future, our strategy for the future is really to try to expand what we our participation. So that's one area where we would look to potentially deploy capital. And again, whenever anybody asks me about M and A, I say maybe because there's a lot of things that have to be in place for it to make sense. When we say synergistic acquisitions one of the key criteria for us is making sure that anything we bring into the fold does create good return on invested capital. So you might imagine some things we would explore are capabilities we can build on to expand our capability in AI.

26:52 You could potentially envision things where we did a lot to really change our financials through business, changing our business model. So to the extent there were opportunities to bring things in where we could create value by you know, implementing a similar business model that could be interesting. So I would characterize it as, you know, I'd say, you know, it's an addition to what we see as strong organic growth. But, you know, it will depend on what's available at what kind of valuations in terms of how we execute on that in the next coming quarters.

27:39 That makes a lot of sense. Well, I appreciate the added color guys. Thank you for the time. All right, thanks. Your next question comes from George Maramo with Pareto Ventures. Hi, thanks for taking my questions. Bob, I was wondering if you could give a little more color on this. You said you got a first order on a cooling application. Can you expand on that a little bit? Yeah. It's basically direct. The application is really geared towards removing heat directly from the semiconductors.

28:33 You know, it's an efficient way. It's a relatively new trend we believe in the industry. And one of our customers for equipment is basically building process around our equipment to do so. So it's an interesting application. It's similar to what we were doing back when there was a lot of build out of EV. You know EV was a booming business. We were selling equipment that was used to do heat exchangers for EV batteries. And this is very similar technology that's being applied to cooling semiconductors and data centers. Would you characterize the opportunity as like a small little niche thing or more than that?

29:25 It's too early to tell George. I think it's an interesting, we've talked about this before. I've mentioned that one of our goals is really to expand what we do in the AI infrastructure space. I think this was a success story we thought was important in terms of our efforts starting to pay off in this pivot. But I can't really characterize how big this is going to be. It's going to depend a lot on how successful our customer is here. Okay. And then you mentioned you have a show in September to introduce some products. Approximately how soon after the show will you start taking orders on these products?

30:16 Usually we're going to get exposure. I mean, we'll ready to start taking orders. We'll have a better sense for that probably at the next quarterly call after we've introduced to see how quickly customers are ready to move on things. But until we actually introduce it, it's not something we know upfront George. We'll provide more color in terms of what we see as a roadmap. Go ahead. How long would it to be able to produce the actual machine in production to ship?

31:03 Yes, Yes. So right now this is similar to the platforms we're producing with typical lead times of six to eight weeks. I suspect we'll be on the high end, maybe a little bit north of that. But I don't think it'll be I think with a little bit of time it should fall within our normal lead times. But it may take six, nine months before the cycle times get to that point. Okay. And then how's the progress going on the chemical business? We've had some wins.

31:52 I mean, yeah, we've talked about some of those. We have a pipeline but it's, you know, we're still, it takes time, right? So we've built the pipeline. We've got a lot of energy right now going towards replicating some of those successes with other customers. So we're expecting to see some incremental improvement in the coming quarters from those efforts. But it's again, we've focused really on getting some momentum behind that pipeline right now. Okay. Thanks Bob. All right. Thanks George. This concludes today's question and answer session.

32:39 I would now like to turn the conference back over to management for any closing remarks. Thank you, operator. In closing, I want to thank everybody for joining our earnings call today. We look forward to seeing some of you later this month at the Canaccord Genuity Conference in Boston. And thanks again for your continued support of Amtech Systems. Have a good evening.