Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________ FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2019 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________ Commission File Number: 0-11412 AMTECH SYSTEMS, INC. Securities registered pur ...

Financial Data and Key Metrics Changes - Net revenue for Q2 2019 was $20.6 million, down from $23.2 million in the previous quarter and $21.1 million in Q2 2018 [11] - Gross margin decreased to 38% from 39% in the previous quarter and 41% in Q2 2018, primarily due to product mix [12] - Unrestricted cash and cash equivalents increased to $47.9 million from $45.9 million at the end of September 2018 [12] Business Line Data and Key Metrics Changes - Semiconductor revenue decreased by approximately $2.9 million sequentially, attributed to variability in orders and delivery schedules from one customer [11] - Silicon carbide LED revenue increased by approximately $0.3 million due to increased machine sales [11] - Compared to the prior year, semiconductor net revenue decreased by approximately $0.5 million due to weakness in the China market [11] Market Data and Key Metrics Changes - The company noted a softer semiconductor market impacted by trade tariff uncertainties, particularly affecting the Asian market [8] - The U.S. market remains robust, helping to mitigate softness from Asia [8] - Backlog at March 31, 2019, was $22 million, down from $23.7 million at December 31, 2018 [12] Company Strategy and Development Direction - The company announced plans to divest the majority of its solar business to focus on semiconductor and silicon carbide power business opportunities [6] - The strategy includes timely product innovations and capitalizing on external opportunities to enhance growth [7] - The company aims to make organic investments to support growth in the power chip and RF markets [10] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term industry growth fundamentals despite current market softness [8] - The company expects continuing softness in the semiconductor equipment industry, forecasting revenue for the next quarter to be in the range of $19 million to $21 million [14] - Management highlighted the importance of acquisitions as part of the growth strategy [29] Other Important Information - The loss from discontinued operations for Q2 2019 was $6.6 million, primarily due to inventory and receivables write-offs [16] - The company is working with advisors to divest its solar business and hopes to complete the sale by the end of the calendar year [16] Q&A Session Summary Question: Can you talk about the silicon carbide market and revenue mix? - Management indicated that the silicon carbide segment's revenue is growing at the same rate as the industry, with a slight bias towards recurring revenue streams [20][22] Question: What are the plans for the automation segment? - Management is evaluating the automation segment, which has been operating at a loss, to determine if it fits into the new strategy [37] Question: Can you provide details on the sales and marketing organization? - The company has an internal sales force and a global agent network, with shared responsibilities for managing customer interactions [32][34] Question: What is the outlook for operating expenses going forward? - Management indicated that the current quarter's operating expenses represent a good run rate, with potential for internal investments as decisions are made [40] Question: What is the exposure to RMB in terms of revenue and costs? - Management noted that while some operations are in RMB, most sales are in U.S. dollars, and they do not break down the exposure granularly [26][27]

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) Amtech Systems, Inc. presents unaudited condensed consolidated financial statements for Q1 and H1 2019, reclassifying the Solar segment as discontinued operations - The company initiated divestiture of its solar business in Q2 2019, classifying the Solar segment as **held for sale** and reporting its results as **discontinued operations**[23](index=23&type=chunk) [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to **$131.6 million** from **$149.4 million** as of March 31, 2019, driven by reduced held-for-sale assets Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2019 (Unaudited) | September 30, 2018 | | :--- | :--- | :--- | | **Total Assets** | **$131,604** | **$149,406** | | Cash and cash equivalents | $47,921 | $45,897 | | Held-for-sale assets | $25,977 | $45,322 | | **Total Liabilities** | **$46,907** | **$56,316** | | Held-for-sale liabilities | $21,965 | $31,798 | | **Total Shareholders' Equity** | **$84,697** | **$93,090** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported a **net loss of $5.6 million** for Q1 2019 and **$8.0 million** for H1 2019, primarily driven by discontinued operations losses Statement of Operations Summary (in thousands) | Metric | Three Months Ended Mar 31, 2019 | Three Months Ended Mar 31, 2018 | Six Months Ended Mar 31, 2019 | Six Months Ended Mar 31, 2018 | | :--- | :--- | :--- | :--- | :--- | | Revenues, net | $20,633 | $21,115 | $43,858 | $48,231 | | Gross profit | $7,927 | $8,582 | $16,947 | $18,542 | | Income from continuing operations | $1,012 | $1,061 | $1,260 | $2,762 | | (Loss) income from discontinued operations | $(6,647) | $1,774 | $(9,267) | $6,525 | | **Net (loss) income** | **$(5,635)** | **$2,835** | **$(8,007)** | **$9,287** | | **Net (loss) income per diluted share** | **$(0.40)** | **$0.19** | **$(0.56)** | **$0.61** | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities improved to **$3.1 million** for H1 2019, with total cash and equivalents decreasing by **$4.4 million** to **$58.1 million** Cash Flow Summary for Six Months Ended March 31 (in thousands) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(3,067) | $(17,515) | | Net cash used in investing activities | $(238) | $(618) | | Net cash (used in) provided by financing activities | $(149) | $1,157 | | **Net Decrease in Cash** | **$(4,357)** | **$(15,604)** | | **Cash, End of Period** | **$58,139** | **$60,157** | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes explain accounting policies, ASC 606 adoption, restructuring charges, solar assets held for sale, segment reporting, and geographic revenue distribution - The company adopted the new revenue recognition standard, **ASC 606**, on October 1, 2018, with no material effect on results of operations[36](index=36&type=chunk)[42](index=42&type=chunk) - **Restructuring charges of $1.0 million** were recorded for H1 2019, primarily due to former CEO severance and office consolidations[65](index=65&type=chunk)[66](index=66&type=chunk) - The company plans to sell its Solar operations by March 31, 2020, with **net assets held for sale at $4.0 million** as of March 31, 2019[70](index=70&type=chunk)[73](index=73&type=chunk) Discontinued Solar Operations Results (in thousands) | Metric | Six Months Ended Mar 31, 2019 | Six Months Ended Mar 31, 2018 | | :--- | :--- | :--- | | Revenues, net | $14,381 | $58,163 | | Gross (loss) profit | $(971) | $13,520 | | **Net (loss) income** | **$(9,267)** | **$6,525** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, strategic exit from solar, a **9% decrease in net revenue** for H1 2019, segment performance, and improved operating cash flow [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Total net revenue decreased **9% to $43.9 million** for H1 2019, with segment declines, while gross margin slightly increased to **39%**, and new orders and backlog fell Net Revenue by Segment - Six Months Ended March 31 (in thousands) | Segment | 2019 | 2018 | % Change | | :--- | :--- | :--- | :--- | | Semiconductor | $35,013 | $37,473 | (7)% | | SiC/LED | $6,256 | $7,126 | (12)% | | Automation | $2,589 | $3,632 | (29)% | | **Total net revenue** | **$43,858** | **$48,231** | **(9)%** | Backlog and New Orders | Metric | March 31, 2019 | March 31, 2018 | % Change | | :--- | :--- | :--- | :--- | | **Total Backlog** | **$21,991** | **$30,376** | **(28)%** | | **New Orders (Six Months)** | **$39,938** | **$53,728** | **(26)%** | - Gross profit for H1 2019 decreased to **$16.9 million**, though gross margin percentage slightly increased to **39%**[121](index=121&type=chunk) - SG&A expenses for H1 2019 decreased slightly to **$12.4 million**, primarily due to lower headcount and related expenses[124](index=124&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) Working capital was **$74.6 million** as of March 31, 2019, with cash used in operations improving to **$3.1 million**, and liquidity is sufficient for the next twelve months - Working capital was **$74.6 million** as of March 31, 2019, a decrease from **$82.7 million** at September 30, 2018[134](index=134&type=chunk) - Cash used in operating activities improved by **$14.4 million**, from **$17.5 million** in H1 2018 to **$3.1 million** in H1 2019[136](index=136&type=chunk) - Management believes existing liquidity sources are sufficient to support operations for at least the **next twelve months**[135](index=135&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Amtech is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Amtech is not required to provide quantitative and qualitative disclosures about market risk[147](index=147&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were **effective** as of March 31, 2019, with no material changes to internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were **effective** as of March 31, 2019[148](index=148&type=chunk) - No material changes were made to internal control over financial reporting during the fiscal quarter[149](index=149&type=chunk) [PART II. OTHER INFORMATION](index=30&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) Legal proceedings refer to Note 9, detailing a terminated turnkey contract in December 2018 with ongoing settlement discussions and no expected material financial effect - A turnkey contract for Phase II was terminated in December 2018, with ongoing settlement discussions and no material financial effect expected[92](index=92&type=chunk) [Item 1A. Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) A material risk factor highlights the potential inability to find a buyer for solar assets, which could lead to asset auctions or winding down operations - A key risk is the potential inability to find a buyer for divested solar assets, which could lead to alternatives like asset auctions or winding down operations[151](index=151&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company announced a **$4 million stock repurchase program** in November 2018, but no shares were repurchased during Q1 2019 - The Board approved a stock repurchase program of up to **$4 million** in November 2018[152](index=152&type=chunk) - No shares were repurchased during the quarter ended March 31, 2019[153](index=153&type=chunk) [Item 6. Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including CEO and CFO certifications and XBRL data files

Financial Data and Key Metrics Changes - Net revenue for Q1 Fiscal 2019 was $29.5 million, compared to $28.8 million in the preceding quarter and $73.6 million in Q1 Fiscal 2018, indicating a year-over-year decrease primarily due to no shipments of solar equipment for the turnkey project [13][18] - Gross margin increased to 31% in Q1 Fiscal 2019 from 29% in the preceding quarter and 28% in the same quarter last year, driven by a higher proportion of semi and SiC/LED shipments [15] - Net loss for Q1 Fiscal 2019 was $2.4 million or $0.17 per share, compared to net income of $6.5 million or $0.42 per diluted share for Q1 Fiscal 2018 [18] Business Segment Performance Changes - The semi and SiC/LED segments generated an operating income of $3.5 million in Q1 Fiscal 2019, supported by continuous demand for products [9] - Solar business segment bookings and financial results reflected challenges in the marketplace, with the termination of a turnkey contract impacting expected revenue [10][12] Market Data and Key Metrics Changes - Backlog at December 31, 2018, was $41.3 million, with $21.6 million from semi and SiC/LED segments and $19.7 million from the solar segment, down from a total backlog of $51.1 million at September 30, 2018 [14] - The company anticipates revenue for the quarter ending March 31, 2019, to be in the range of $27 million to $29 million, with gross margin expected in the mid-to-upper 20% range [19] Company Strategy and Industry Competition - The company is undergoing a comprehensive review to address current solar challenges and position itself for profitable growth, focusing on expanding the semi and SiC/LED segments [7][8] - The solar segment faces significant competition, particularly from local Chinese manufacturers, and is impacted by changing government policies in China [10][11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macroeconomic challenges, including the U.S.-China trade tensions, which may impact semiconductor sales [22] - The company expects continued growth in the silicon carbide LED polishing segment, despite anticipated headwinds in the broader semiconductor market [22][32] Other Important Information - Restructuring expenses were $0.9 million in Q1 Fiscal 2019, with ongoing efforts to reduce losses in the solar segment [17][30] - The company is exploring potential M&A opportunities in the SiC silicon power chip value chain [26] Q&A Session Summary Question: Can you provide insight into the 13% semiconductor customer and the end market? - The customer is in the chip fabrication segment, and while there are headwinds expected in 2019, growth is anticipated in the silicon carbide LED polishing segment [22][23] Question: What is the outlook for operating expenses in the coming quarters? - Operating expenses are expected to remain relatively flat [25] Question: Are there specific areas for potential M&A to diversify the portfolio? - The company is interested in newly emerging opportunities in the SiC silicon power chip value chain [26] Question: Can you discuss the strong gross margin performance and its sustainability? - The strong gross margin was due to a higher proportion of revenues from the semi and silicon carbide LED segments, which typically have higher margins [28] Question: What is the plan to reduce losses in the solar segment? - A comprehensive review is underway, and the restructuring plan is expected to yield savings as the company reassesses costs associated with the terminated turnkey project [30] Question: What is the growth outlook for the semi and silicon carbide/LED polishing businesses? - While growth may be softer in the short term due to macro challenges, long-term growth prospects remain strong [32]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________ FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: December 31, 2018 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________ Commission File Number: 0-11412 AMTECH SYSTEMS, INC. (Exact name of regist ...