Amtech Systems - Q1 2026

Transcript

Operator (participant)

Good day everyone and welcome to the Amtech Systems fiscal first quarter 2026 earnings call. Please note that this call is being recorded and simultaneously webcast. I would now like to turn the call over to Jordan Darrow of Darrow Associates Investor Relations. Please go ahead.

Jordan Darrow (Founder and CEO)

Thank you and good afternoon everyone. We appreciate you joining us for the Amtech Systems fiscal 2026 first quarter conference call on the webcast. With me today on the call are Bob Daigle, Chairman and Chief Executive Officer, and Mark Weaver, Interim Chief Financial Officer. After close of market today, Amtech released its financial results for the first quarter of 2026. 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 safe harbor disclaimer in our public filings cover this call and the webcast. Some 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 in the investors section of our corporate website.

The company assumes no obligation to update any such forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements which speak only as of today. These statements are not a guarantee of future performance and actual results could differ materially from current expectations. Among the important factors which could cause actual results to differ materially from those in forward-looking statements are changes in technologies 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 in 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 first quarter. You will find a reconciliation of those non-GAAP measures to our actual GAAP results included in the press release issued today. I will now turn the call over to Amtech's Chief Executive Officer Bob Daigle.

Bob Daigle (Chairman and CEO)

Thank you, Jordan, and welcome to everyone joining our call today. Before I provide commentary on the quarter and recent developments, I'd like to introduce Mark Weaver, our interim CFO. Mark joined us on December 16th to help us with our CFO transition until we appoint a permanent CFO. While we are making progress in our search, I'm confident we are in terrific hands with Mark. I had the privilege of having him as a colleague when he served as the Chief Accounting Officer and Corporate Controller of Rogers Corporation. Among other senior financial roles, he was the Chief Accounting Officer of NXP Semiconductors. We're very pleased to have someone with his experience assist us during this transition. Now, onto my review of the quarter. Revenue for the quarter was $19 million at the midpoint of our guidance and our Adjusted EBITDA was $1.4 million, also within our guidance range.

The quarter benefited from strength in demand for AI-related products which accounted for 35% of revenue for our Thermal Processing Solutions segment in the first quarter, up from about 30% in the fourth quarter. Another highlight is that our bookings were strong for the quarter. Our overall book-to-bill ratio was 1.1, driven by performance of our Thermal Processing Solutions segment due to strength in AI equipment orders. We have the ability to deliver the majority of this equipment in the second quarter due to our short lead times, but customers have requested some deliveries in the third quarter to align with their factory build-outs. As broadly reported, semiconductor OEMs and OSATs continue to increase investments to expand capacity to support strong AI infrastructure demand. We expect demand for the equipment we produce for AI applications to continue to increase in the third and fourth quarters.

In addition to traditional advanced packaging bookings, I'm pleased to report that we received initial orders from multiple industry leaders for panel-level packaging equipment during the quarter. Panel-level packaging is an emerging technology that provides cost and throughput advantages that should drive broader adoption and is expected to lead to future growth. We're also continuing to invest in next-generation equipment for high-density packaging to support emerging customer requirements. We believe this next-generation equipment will provide the opportunity to significantly increase our addressable market beyond 2026. We are currently processing samples for multiple customers. For our Semiconductor Fabrication Solutions segment, I'm pleased to report our first win for a specialty chemical product that we developed for a medical device semiconductor application. We produced and delivered initial product in the first quarter.

Strong customer engagement and a robust opportunity pipeline for our specialty chemicals is validating our strategy to overserved, underserved customers with technically demanding, high-value applications. We also had improved bookings for our Entrepix and BTU Parts and Services businesses during the quarter as a result of a more proactive approach to business development and improvements we've made in service levels. Unfortunately, weak demand for our PR Hoffman products negatively impacted overall SFS results for the quarter and offset bookings gains at Entrepix. Demand at PR Hoffman continues to be impacted by weakness in the mature node semiconductor market and severe cost pressures at major silicon carbide semiconductor customers. 2026 will be an investment year at SFS as we execute on our strategy to overserve the underserved, but we expect double-digit growth and meaningful profits from these sticky reoccurring revenue streams beyond 2026.

We believe the strong operating leverage and working capital efficiency that has resulted from our product line rationalization efforts and a migration to a semi-fabless manufacturing model over the past two years will result in continued strong cash flow and further increases in gross margins as revenues increase. This was our ninth consecutive quarter of positive operating cash flow. Cash generated from operations was $4.1 million for the first quarter and we ended the quarter with a cash balance of $22.1 million without debt. Adoption of a semi-fabless model which included the consolidation of our manufacturing footprint from seven facilities to four should also allow us to significantly increase revenue with minimal capital expenditures. We expect capital expenditures for the year to be below $1 million.

In summary, growth opportunities driven by AI infrastructure investments and our differentiated capabilities combined with strong operating leverage as a result of our asset-light semi-fabless business model position us very well to deliver meaningful shareholder value. Now, for further details on our financial results, I'll pass the call to Mark.

Mark Weaver (Interim CFO)

Great. Thank you, Bob. It really is a pleasure to be working with you again, even if it's for a short period of time. Now, onto my review of the financials for the fiscal 2026 first quarter. For proper perspective, net revenues of $19 million in the first quarter of 2026 do not represent a meaningful comparison to the prior year period. This is due to the company's product line rationalization that began two years ago. For these periods, the only perspective worth noting is for AI-related demand which grew year-over-year. You'll see in a moment the benefits of this rationalization. To date, when I address AI revenues as part of our TPS segment and when I talk about our consolidated gross margin as a percentage of revenues and other improvements in the company's operating performance, cash flow generation, and balance sheet.

Back to the discussion on revenues, a more appropriate comparison is to the fourth quarter. Total revenues were positively influenced by growth in AI product demand within the TPS segment. AI revenues contributed approximately 35% of TPS revenue versus 30% in Q4. The increase was approximately 10% on a sequential basis. Bookings for AI applications remained strong. Other areas of TPS and SFS sales offset this growth on a consolidated basis, which is attributable to general weakness in non-AI areas of the semiconductor industry, in particular for mature node semiconductors used in the automotive electronics industry. Circling back to the benefits of the company's transformation, gross margin as a percentage of sales increased in the first quarter of 2026 sequentially from the fourth quarter and year-over-year from the first quarter of last year. Importantly, the increase in gross margin was achieved on lower sales volume.

Gross margin as a percentage of sales increased to 44.8% in the first quarter of 2026 from 38.4% in the same period of the prior year and 44.4% in the fourth quarter. Selling general and administrative expenses increased $500,000 sequentially from the prior quarter but decreased by $1.2 million as compared to the first quarter of 2025. The increase from the prior quarter is primarily due to incentive compensation, professional fees, and insurance, and the decrease from the prior year period is primarily due to cost reduction efforts and structural changes to reduce fixed costs. Research, development, and engineering expenses increased by $0.3 million sequentially from the prior quarter and were relatively flat compared to the same prior year period. The company continues to maintain a more focused approach to its innovation investments, including next-generation products targeting the AI supply chain and our specialty chemicals business.

GAAP net income for the first quarter of fiscal 2026 was $0.1 million or $0.01 per share. This compares to GAAP net income of $1.1 million or $0.07 per share for the preceding quarter and GAAP net income of $0.3 million or $0.02 per share for the first quarter of fiscal 2025. Unrestricted cash and cash equivalents at December 31st, 2025, were $22.1 million compared to $17.9 million at September 30th, 2025, due primarily to the company's focus on operational cash generation, working capital optimization, strong accounts receivable collections, and accounts payable management. In the past 12 months through December 31st, 2025, cash increased by 67% or $8.9 million while the company has remained without debt. As for the stock repurchase program, the company did not use any cash for this as no shares were repurchased since the plan was put in place on December 9th.

Now, turning to our outlook. For the second fiscal quarter ending March 31st, 2026, the company expects revenue in the range of $19 million-$21 million. At the midpoint of this range, our guidance is a sequential increase from our reported revenue for the first quarter. AI-related equipment sales for the Thermal Processing Solutions segment is anticipated to drive the majority of our revenue growth. With the benefit of previously implemented structural and operational cost reductions, Amtech expects to continue delivering solid operating leverage resulting in Adjusted EBITDA margins once again coming in at high single digits. The outlook provided during our call today and in our earnings press release is based on an assumed exchange rate between the United States dollar and foreign currencies. Changes in the value of foreign currencies in relation to the United States dollar could cause actual results to differ from expectations.

Now I will turn the call over to the operator for questions.

Operator (participant)

Ladies and gentlemen, at this time, we'll begin that question and answer session. If you would like to ask a question, you may press star and then one using a touchscreen telephone. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Once again, that is star and then one to join the question queue. We'll pause momentarily to assemble the roster. Our first question today comes from George Marema from Pareto Ventures. Please go ahead with your question.

George Marema (Research Analyst)

Hi, Bob. Good afternoon.

Bob Daigle (Chairman and CEO)

Hello, George. Good afternoon.

George Marema (Research Analyst)

I was curious on this you discussed in the call about this panel-level business. Could you elaborate a little bit on what that is, a little more color on that?

Bob Daigle (Chairman and CEO)

Yeah. Traditionally, chip packaging has been pretty discrete components, and the drive is really from a cost-effectiveness and throughput perspective to start to produce packaging really in large panel formats and then basically dice them up later like they do with semiconductor wafers. Our sense is this is really the future of advanced packaging, so it was important for us to really basically demonstrate that. Again, we were in a position of process of record with the key OEMs and OSATs. So the variety of customer orders that we received for that technology in this quarter, I think, was good validation about future demand.

George Marema (Research Analyst)

During 2025, you were talking about perhaps in 2026 fiscal, you may have some new products. Does this have anything to do with that, some new capabilities?

Bob Daigle (Chairman and CEO)

The new products are more around addressing higher density packaging requirements. Panel processing uses very similar technology to what we're providing today. And again, what I mentioned earlier is we've built equipment, we're processing samples for customers for these higher density packaging applications, but we're still in the relatively early stages. At this stage, I'm thinking, George, that you're looking at probably 2027 before we would see any meaningful demand from that next generation equipment.

George Marema (Research Analyst)

Okay. I was happy to hear you got a win in the specialty chemical business. Are there any other qualifications underway in the services and chemical businesses?

Bob Daigle (Chairman and CEO)

Yeah. We have a variety of active engagements right now. Again, as I mentioned in the commentary, I've been very pleased with the level of customer engagement and pull for these collaborative development efforts. I think we're starting to get a sense that this business model that we've developed around addressing these niche applications looks very promising. Looks very promising in terms of developing a pipeline of these recurring revenue streams.

George Marema (Research Analyst)

Okay. That's great to hear. Thanks, Bob.

Bob Daigle (Chairman and CEO)

All right. Thank you, George.

Operator (participant)

Our next question comes from Gary DiStefano from Titan Partners. Please go ahead with your question.

Gary DiStefano (Director of Investment Banking)

Yeah. Hey, Bob. Congrats on the very solid quarter.

Bob Daigle (Chairman and CEO)

Thank you, Gary.

Gary DiStefano (Director of Investment Banking)

No problem. Listen, just a quick macro question level for me. Listen, given the growing backlog, customer orders, consistent operating cash flow, continued customer engagement, what are you most encouraged about here as you move through fiscal 2026?

Bob Daigle (Chairman and CEO)

Yeah. I think the two areas that are strong bookings and as in the commentary, right? We have short lead times. We've talked about this before: short lead times on the equipment we provide for AI packaging. So we had a very solid booking quarter. Some of it stretches into Q3, but at least based on our channel checks and what we're hearing from those out in the field, we're seeing continued strong demand. And what we're hearing is we should continue to see strength that goes into third quarter, fourth quarter as well. Because there's always been the question of how long is the demand going to continue? And we're getting continued evidence that we've got better visibility out to a few quarters now, which gives us some comfort.

As I mentioned, this being the process of record for panel-level packaging also gives us some comfort in terms of driving future demand because we do think that's going to be a key part of where the industry is going. And I'd say the third area, which George explored earlier, is really the evidence that both the win with a customer but also the strength of the pipeline we're seeing for our specialty chemicals, I think, puts us in a position where in terms of visibility towards growth and increasing confidence about growth, we're in a good place. And again, the fact that we continue to see as we see this revenue flow through, the margin profile continues to strengthen, which is what we anticipated, but ultimately, we needed to see it in our results, and we are seeing it.

Gary DiStefano (Director of Investment Banking)

That makes sense. I appreciate you taking the question, Bob. Thank you.

Bob Daigle (Chairman and CEO)

Thank you.

Operator (participant)

Once again, if you would like to ask a question, please press star and then one. To withdraw your questions, you may press star and two. Our next question comes from Craig Irwin from Roth Capital Partners. Please go ahead with your question.

Craig Irwin (Managing Director and Senior Research Analyst)

Thank you. Good evening. So Bob, I know you've worked so hard over the last several quarters to bring down your frictional costs, right? Downsizing the footprint, adjusting your spending to your highest priority projects and customers. This quarter, we saw a $700,000 increase quarter-over-quarter on the SG&A and R&D lines combined. I know you're not going to be spending that much money unless you're very intentional about it. Can you maybe call out any items in there that you think are particularly interesting or projects or customers or general areas of commitment? Is this AI, or is this something for the broader semiconductor industry? Anything you could share.

Bob Daigle (Chairman and CEO)

Yeah. No. The R&D increases are really in two categories. We are investing and have increased investments in the next generation packaging equipment for AI applications.

So being able to handle higher density, we increased investments really to move more quickly. And I thought that was important for us. It's a huge opportunity for us that we need to capitalize on. And again, I think the commentary around the semi-fab solutions traction. Now we've seen some validation, so we have increased resources a bit in that area and really trying to build that momentum behind growth in that business as well. On more of the G&A side thing, there were consulting costs. There's also some variable comp costs that were in the quarter that I think will be ongoing. I'm not so sure that the consulting costs, some of that could come down a bit as well in future quarters. But those were the main drivers for the differences quarter-over-quarter. Understood.

Craig Irwin (Managing Director and Senior Research Analyst)

Thank you for that. Then the next thing is business momentum, right? I know we're kind of in a choppy environment. You've been climbing a set of stairs as far as your AI revenue makes 25, 30, 35. That's awesome. Can you really? Do you have confidence that that mix is likely to continue to increase over the next couple of quarters? And I know that there's not a whole lot of order visibility per se, given the fast book-and-burn nature of a lot of your business. 1-to-1 book-to-bill is great. But do you feel like the sort of general tempo of that base business is healthy and potentially accelerating to where we can see different growth than what we've had over the last couple of quarters?

Bob Daigle (Chairman and CEO)

So let me start with the AI. I think our visibility is improved on the AI part of the business.

Customers are more open around what they have planned for expansion these days because, obviously, with the rapid ramps, people are more concerned about making sure their supply chains, their supply base can support that. So we're feeling pretty good around it. It's not great visibility. It's not like the orders are placed, but in terms of forecasts and what we're hearing in terms of the tempo and the buildouts, right? Because I think if you characterized prior quarters, the equipment, for the most part, we were providing for AI chip packaging was, I'll call it, squeezing equipment into existing facilities. But you're now seeing new facilities being built and starting to be outfitted with equipment. And that's part of when I commented on the strong book-to-bill in the first quarter, but some of these orders on the third quarter, that's tied to that, right?

They're going to finish the facilities in the second quarter, do some of the installation work in the third quarter. In terms of visibility on the balance of the semiconductor market, I read the same things and pay the same attention probably to the same sources you do. There's some inklings of maybe some improvement in the more traditional mature node markets, but the clarity is definitely not as good in that space as it is in AI. So I do expect the momentum to continue around AI. Those other parts of the business, we're less certain about, and that was reflected, frankly, in our guidance for the second quarter.

Craig Irwin (Managing Director and Senior Research Analyst)

Understood. Last question, if I may. Sometimes GAAP earnings can be important, just given the different data services out there in the market. This quarter, you had an 83% tax rate.

That doesn't strike me as a natural or normal tax rate for you. Can you maybe talk us through what this was and what you think a fair tax rate could be for this year? I realized last year, actually, it was a tax benefit. So I wouldn't be surprised if we saw one again. But this kind of thing does sometimes create a little volatility in smaller names. Yeah.

Mark Weaver (Interim CFO)

Yeah. Let me ask Mark to jump in here.

Yeah. So Craig, this is because our U.S. entities are in a loss position. And so with them being in a loss position, there's no tax benefit that's recognized as a result of them being in a loss position because we have a valuation allowance against our deferred tax assets. So what you're seeing is the tax is coming through that's on our foreign entities. And although the foreign entities have income, right, that's probably twice as much as the loss in the U.S. But the loss in the U.S., because that benefit doesn't come through because we have a valuation allowance, it ends up being that you're showing a larger tax expense on the bottom line in relationship to the overall income because that income is reduced on a book basis because of the U.S. Does that help?

Craig Irwin (Managing Director and Senior Research Analyst)

That makes complete sense to me. I've seen this many times in the past. As we watch this U.S. supercycle play out, hopefully, end up having to pay a lot of taxes at a low rate, but a lot of taxes in the future, right? So congratulations on the progress this quarter. I'll hop back in the queue. All right. Thanks, Craig.

Operator (participant)

With that, we'll be ending today's question and answer session. I would like to turn the floor back over to Bob Daigle for closing remarks.

Bob Daigle (Chairman and CEO)

All right. Well, thank you. In closing, I want to thank everybody on the call today. We look forward to seeing some of you in March at the upcoming annual Roth Capital Conference as well as other investor relations activities. For everyone else, please stay tuned for updates on our continued progress and have a good evening.

Operator (participant)

Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.