Amtech Systems(ASYS) - 2024 Q2 - Quarterly Results

Executive Summary Amtech reported strong Q2 FY2024 results with increased net revenue, positive GAAP operating income, and a significant reduction in debt, positioning for future growth Q2 FY2024 Financial and Operational Highlights Amtech reported Q2 FY2024 results with net revenue of $25.4 million, GAAP operating income of $1.4 million, and GAAP net income of $1.0 million, also generating $2.5 million in net proceeds from the sale of its corporate headquarters and reducing debt by $6.4 million, ending the quarter with a net cash position of $8.8 million | Metric | Q2 FY2024 | | :----- | :-------- | | Net revenue | $25.4 million | | GAAP operating income | $1.4 million | | GAAP net income | $1.0 million | | Non-GAAP operating income | $0.2 million | | Non-GAAP net loss | $0.2 million | | Customer orders | $19.8 million | | Backlog | $44.3 million | - Net proceeds of $2.5 million from the sale of corporate headquarters building[2] - Debt payments of $6.4 million, resulting in a net cash position of $8.8 million[2] CEO Commentary CEO Bob Daigle highlighted improved cost structure and operational effectiveness, exceeding revenue guidance despite soft market demand, noting the company's adjusted EBITDA of $0.8 million and strategic alignment of the organization size to current market demand, positioning Amtech for strong operating results upon semiconductor market recovery - Exceeded revenue guidance with $25.4 million, driven by improved cost structure and operational effectiveness[3] - Delivered adjusted EBITDA of $0.8 million despite continued softness in overall market demand[3] - Company is positioned to deliver strong operating results as the broader semiconductor market recovers, following organizational alignment to current market demand[3] Consolidated Financial Performance This section analyzes Amtech's Q2 FY2024 net revenues, gross profit, operating expenses, and net income, highlighting sequential and year-over-year changes Net Revenues Analysis Net revenues for Q2 FY2024 were $25.4 million, a 2% sequential increase primarily due to increased consumable sales in the Material and Substrate segment, but a 24% decrease year-over-year due to a slowdown in the broader semiconductor market | Metric | Q2 FY2024 (in millions) | Q1 FY2024 (in millions) | Q2 FY2023 (in millions) | Sequential Change | YoY Change | | :----- | :---------------------- | :---------------------- | :---------------------- | :---------------- | :--------- | | Net Revenues | $25.4M | $24.9M | $33.3M | +2% | -24% | - Sequential increase primarily due to increased consumable sales in the Material and Substrate segment as customers update their buying patterns and adjust inventory levels[5] - Decrease from prior year primarily attributable to lower sales across most of the product portfolio due to a slow-down in the broader semiconductor market[5] Gross Profit and Margin Analysis GAAP gross margin was flat sequentially at 33.2% but decreased from 40.4% in Q2 FY2023, with the Semiconductor segment's GAAP gross margin negatively affected by product mix and increased material costs, while the Material and Substrate segment saw sequential and YoY increases due to a more favorable product mix and increased consumable sales, and Non-GAAP gross margin decreased sequentially and YoY due to less favorable product mix and increased material costs | Metric | Q2 FY2024 (in millions) | Q1 FY2024 (in millions) | Q2 FY2023 (in millions) | | :----- | :---------------------- | :---------------------- | :---------------------- | | GAAP Gross Profit | $8.5M | $8.2M | $13.5M | | GAAP Gross Margin | 33.2% | 33.0% | 40.4% | | Non-GAAP Gross Profit | $8.6M | $9.3M | $13.5M | | Non-GAAP Gross Margin | 33.9% | 37.5% | 40.4% | - Semiconductor segment GAAP gross margin negatively affected by product mix and increased material costs, both primarily attributed to shipments of horizontal diffusion furnaces[6] - Material and Substrate segment GAAP gross margin 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[6] Operating Expenses Selling, General & Administrative (SG&A) expenses decreased by $0.3 million sequentially and $3.2 million YoY, driven by reductions in labor, commissions, shipping, and lower acquisition and amortization expenses, while Research, Development and Engineering (R&D) expenses decreased by $0.7 million sequentially and $0.6 million YoY, mainly due to timing of purchases for specific projects in the Semiconductor segment - SG&A expenses decreased $0.3 million sequentially due primarily to reductions in labor expenses and lower commissions and shipping expenses[7] - SG&A expenses decreased $3.2 million YoY, primarily due to $1.5 million of lower acquisition expenses, $0.6 million of lower amortization expense, and reductions in labor, commissions and shipping expenses[7] - Research, Development and Engineering expenses decreased $0.7 million sequentially and $0.6 million YoY due primarily to the timing of purchases related to specific projects in the Semiconductor segment[7] Operating Income (Loss) Amtech reported GAAP operating income of $1.4 million in Q2 FY2024, a significant improvement from a GAAP operating loss of $8.9 million in the prior quarter and an increase from $0.5 million in Q2 FY2023, while Non-GAAP operating income was $0.2 million, turning positive from a $0.2 million loss sequentially but down from $3.2 million in Q2 FY2023 | Metric | Q2 FY2024 (in millions) | Q1 FY2024 (in millions) | Q2 FY2023 (in millions) | | :----- | :---------------------- | :---------------------- | :---------------------- | | GAAP Operating Income (Loss) | $1.4M | ($8.9M) | $0.5M | | Non-GAAP Operating Income (Loss) | $0.2M | ($0.2M) | $3.2M | Net Income (Loss) and EPS GAAP net income for Q2 FY2024 was $1.0 million ($0.07 per diluted share), a substantial improvement from a GAAP net loss of $9.4 million ($0.66 per diluted share) for the preceding quarter, but lower than $3.2 million ($0.23 per diluted share) for Q2 FY2023, while Non-GAAP net loss was $0.2 million ($0.01 per diluted share), an improvement from a $0.6 million loss sequentially, but a decline from $2.7 million net income ($0.19 per diluted share) in Q2 FY2023 | Metric | Q2 FY2024 (in millions) | Q1 FY2024 (in millions) | Q2 FY2023 (in millions) | | :----- | :---------------------- | :---------------------- | :---------------------- | | GAAP Net Income (Loss) | $1.0M | ($9.4M) | $3.2M | | GAAP Net Income (Loss) per Diluted Share | $0.07 | ($0.66) | $0.23 | | Non-GAAP Net (Loss) Income | ($0.2M) | ($0.6M) | $2.7M | | Non-GAAP Net (Loss) Income per Diluted Share | ($0.01) | ($0.04) | $0.19 | Segment Performance This section details the Q2 FY2024 financial performance of Amtech's Semiconductor and Material and Substrate segments, including revenues, gross margins, and operating income Semiconductor Segment The Semiconductor segment reported net revenues of $17.4 million in Q2 FY2024, a slight decrease from $17.5 million sequentially and a notable decrease from $22.0 million YoY, with GAAP gross margin at 29%, down from 35% sequentially and 41% YoY, and GAAP operating income of $0.9 million | Metric (in thousands) | Q2 FY2024 | Q1 FY2024 | Q2 FY2023 | | :----- | :-------- | :-------- | :-------- | | Revenues, net | $17,441 | $17,527 | $22,047 | | GAAP Gross Profit | $5,040 | $6,159 | $8,931 | | GAAP Gross Margin | 29% | 35% | 41% | | GAAP Operating Income | $896 | $1,081 | $2,950 | | New orders | $12,061 | $17,129 | $24,606 | | Backlog | $39,455 | $44,835 | $54,767 | Material and Substrate Segment The Material and Substrate segment's net revenues increased to $8.0 million in Q2 FY2024 from $7.4 million sequentially, though down from $11.3 million YoY, with GAAP gross margin significantly improving to 43% from 28% sequentially, and comparable to 40% YoY, and GAAP operating income of $0.9 million, a substantial recovery from a $7.8 million loss in the prior quarter | Metric (in thousands) | Q2 FY2024 | Q1 FY2024 | Q2 FY2023 | | :----- | :-------- | :-------- | :-------- | | Revenues, net | $7,992 | $7,393 | $11,263 | | GAAP Gross Profit | $3,411 | $2,060 | $4,539 | | GAAP Gross Margin | 43% | 28% | 40% | | GAAP Operating Income (Loss) | $900 | ($7,844) | $297 | | New orders | $7,710 | $5,976 | $9,660 | | Backlog | $4,861 | $5,144 | $11,071 | Financial Position and Cash Flow This section reviews Amtech's balance sheet as of March 31, 2024, and analyzes cash flow activities for the six months ended March 31, 2024 Balance Sheet Highlights As of March 31, 2024, total assets decreased to $116.5 million from $137.0 million at September 30, 2023, with current assets, accounts receivable, and inventories seeing reductions, while total liabilities decreased to $35.6 million from $48.7 million, primarily due to a significant reduction in finance lease liabilities and long-term debt, and shareholders' equity decreased to $80.9 million from $88.4 million | Metric (in thousands) | March 31, 2024 | September 30, 2023 | Change | | :----- | :------------- | :----------------- | :----- | | Total Assets | $116,474 | $137,021 | -$20,547 | | Cash and cash equivalents | $13,000 | $13,133 | -$133 | | Accounts receivable | $21,230 | $26,474 | -$5,244 | | Inventories | $31,308 | $34,845 | -$3,537 | | Total Liabilities | $35,583 | $48,656 | -$13,073 | | Finance Lease Liabilities and Long-Term Debt | $65 | $8,422 | -$8,357 | | Total Shareholders' Equity | $80,891 | $88,365 | -$7,474 | Cash Flow Activities For the six months ended March 31, 2024, net cash provided by operating activities was $5.3 million, a significant improvement from a $5.3 million use in the prior year, with investing activities providing $0.7 million, primarily from the sale of property, plant, and equipment, and financing activities using $6.4 million, mainly due to debt payments | Cash Flow Activity (in thousands) | Six Months 2024 | Six Months 2023 | | :-------------------------------- | :-------------- | :-------------- | | Net cash provided by (used in) operating activities | $5,307 | ($5,327) | | Net provided by (used in) investing activities | $724 | ($36,474) | | Net cash (used in) provided by financing activities | ($6,385) | $11,919 | | Cash and Cash Equivalents, End of Period | $13,000 | $17,733 | - Unrestricted cash and cash equivalents at March 31, 2024, were $13.0 million, compared to $13.1 million at September 30, 2023[9] - Debt payments during the three months ended March 31, 2024, were $6.4 million, resulting in a net cash position of $8.8 million as of March 31, 2024, compared to $7.0 million as of December 31, 2023[9] Business Outlook and Strategic Actions This section outlines Amtech's Q3 FY2024 guidance, strategic initiatives to reduce costs, and market factors influencing future operating results Q3 FY2024 Guidance For the third fiscal quarter ending June 30, 2024, Amtech expects revenues in the range of $22 million to $25 million, with adjusted EBITDA projected to be nominally positive, including some expenses and production downtime related to the BTU facility move - Expected revenues for the third fiscal quarter ending June 30, 2024, are in the range of $22 million - $25 million[12] - Adjusted EBITDA for Q3 FY2024 is expected to be nominally positive, which includes some expenses and production downtime with the BTU facility move[12] Strategic Initiatives and Market Factors Amtech remains confident in the future prospects for its consumables and equipment serving advanced mobility and advanced packaging applications, having implemented actions in Q1 and Q2 FY2024 to reduce structural costs by approximately $6 million annually and align product pricing, aiming to significantly improve results and enhance profitability through market cycles, though operating results are subject to timing of orders, shipments, logistical challenges, semiconductor market cycles, and Renminbi exchange rate fluctuations - Confidence in strong future prospects for both consumables and equipment serving advanced mobility and advanced packaging applications[12] - Actions taken during Q1 and Q2 FY2024 will reduce Amtech's structural costs by approximately $6 million annually and better align product pricing with value, expected to significantly improve results and enhance profitability[12] - Operating results can be significantly impacted by the timing of orders, system shipments, logistical challenges, financial results of semiconductor manufacturers, and cyclical changes in market demand. Changes in the value of the Renminbi could also cause actual results to differ from expectations[11][13] Corporate Information This section provides an overview of Amtech Systems, Inc., details regarding its Q2 fiscal results conference call, and a cautionary note on forward-looking statements About Amtech Systems, Inc. Amtech Systems, Inc. is a global manufacturer of thermal processing, wafer cleaning, and chemical mechanical polishing (CMP) capital equipment and related consumables, serving semiconductor, advanced mobility, and renewable energy manufacturing applications, with a strategic focus on growth opportunities in thermal and substrate processing, under key brands including BTU International, Entrepix, Inc., PR Hoffman™, and Intersurface Dynamics, Inc. - Amtech Systems, Inc. is a leading, global manufacturer of thermal processing, wafer cleaning and chemical mechanical polishing (CMP) capital equipment and related consumables[15] - Products are used in semiconductor, advanced mobility and renewable energy manufacturing applications[15] - Strategic focus is on growth opportunities which leverage strengths in thermal and substrate processing, recognized under brand names BTU International, Entrepix, Inc., PR Hoffman™ and Intersurface Dynamics, Inc.[15] Conference Call Details Amtech Systems hosted a conference call on May 8, 2024, at 5:00 pm ET to discuss Q2 fiscal results, with details for dialing in and accessing the live webcast and replay provided - Amtech Systems hosted a conference call on Wednesday, May 8, 2024, at 5:00 pm ET to discuss fiscal second quarter financial results[14] - A live webcast of the conference call was available in the Investor Relations section of Amtech's website[14] - A replay of the webcast will be available for approximately 30 calendar days[14] Cautionary Note Regarding Forward-Looking Statements The press release contains forward-looking statements regarding future financial results, business strategies, and operational objectives, which are not guarantees of future performance and involve risks, uncertainties, and assumptions, as detailed in the company's SEC filings (Form 10-K and 10-Qs), with the company undertaking no obligation to update these statements - All statements in this press release, other than statements of historical fact, are identified as 'forward-looking statements'[16] - Examples include statements regarding Amtech's future financial results, operating results, business strategies, and efforts to improve operational efficiencies[16] - These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict, as detailed in the Company's Form 10-K and subsequently filed Quarterly Reports on Form 10-Qs[16][17] Detailed Financial Schedules This section provides comprehensive unaudited consolidated financial statements, including statements of operations, balance sheets, cash flows, and GAAP to Non-GAAP reconciliations Consolidated Statements of Operations This section presents the unaudited consolidated statements of operations for the three and six months ended March 31, 2024, and 2023, detailing revenues, cost of sales, gross profit, operating expenses, and net income (loss) | Metric (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Six Months Ended March 31, 2024 | Six Months Ended March 31, 2023 | | :-------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Revenues, net | $25,433 | $33,310 | $50,353 | $54,868 | | Cost of sales | $16,982 | $19,840 | $32,834 | $33,095 | | Gross profit | $8,451 | $13,470 | $16,670 | $21,773 | | Selling, general and administrative | $8,252 | $11,434 | $16,819 | $20,624 | | Research, development and engineering | $921 | $1,517 | $2,509 | $2,910 | | Operating income (loss) | $1,363 | $519 | ($7,571) | ($2,161) | | Net income (loss) | $970 | $3,204 | ($8,388) | $460 | | Net income (loss) per diluted share | $0.07 | $0.23 | ($0.59) | $0.03 | Consolidated Balance Sheets This section provides the unaudited consolidated balance sheets as of March 31, 2024, and September 30, 2023, outlining assets, liabilities, and shareholders' equity | Metric (in thousands) | March 31, 2024 | September 30, 2023 | | :-------------------- | :------------- | :----------------- | | Total Current Assets | $70,299 | $81,189 | | Property, Plant and Equipment - Net | $9,476 | $9,695 | | Intangible Assets - Net | $4,352 | $6,114 | | Goodwill | $21,261 | $27,631 | | Total Assets | $116,474 | $137,021 | | Total Current Liabilities | $25,914 | $29,718 | | Finance Lease Liabilities and Long-Term Debt | $65 | $8,422 | | Total Liabilities | $35,583 | $48,656 | | Total Shareholders' Equity | $80,891 | $88,365 | Consolidated Statements of Cash Flows This section presents the unaudited consolidated statements of cash flows for the six months ended March 31, 2024, and 2023, detailing cash flows from operating, investing, and financing activities | Cash Flow Activity (in thousands) | Six Months 2024 | Six Months 2023 | | :-------------------------------- | :-------------- | :-------------- | | Net cash provided by (used in) operating activities | $5,307 | ($5,327) | | Net provided by (used in) investing activities | $724 | ($36,474) | | Net cash (used in) provided by financing activities | ($6,385) | $11,919 | | Effect of Exchange Rate Changes on Cash and Cash Equivalents | $221 | $741 | | Net Decrease in Cash and Cash Equivalents | ($133) | ($29,141) | | Cash and Cash Equivalents, End of Period | $13,000 | $17,733 | GAAP to Non-GAAP Reconciliations This section provides detailed reconciliations of GAAP to Non-GAAP financial measures for gross profit, operating income (loss), and net income (loss) for Amtech Systems, Inc. and its segments, with Non-GAAP adjustments excluding items such as stock compensation, severance, acquisition expenses, intangible asset impairment, and gain on sale of assets GAAP Gross Profit Reconciliation | Metric (in thousands) | Q2 FY2024 | Q1 FY2024 | Q2 FY2023 | | :-------------------- | :-------- | :-------- | :-------- | | GAAP gross profit | $8,451 | $8,219 | $13,470 | | Write-down of inventory related to polishing equipment | $175 | $273 | - | | Intangible asset impairment | - | $849 | - | | Non-GAAP gross profit | $8,626 | $9,341 | $13,470 | GAAP Operating Income (Loss) Reconciliation | Metric (in thousands) | Q2 FY2024 | Q1 FY2024 | Q2 FY2023 | | :-------------------- | :-------- | :-------- | :-------- | | GAAP operating income (loss) | $1,363 | ($8,934) | $519 | | Gain on sale of fixed assets | ($2,197) | - | - | | Goodwill impairment | - | $6,370 | - | | Non-GAAP operating income (loss) | $188 | ($210) | $3,162 | GAAP Net Income (Loss) Reconciliation | Metric (in thousands) | Q2 FY2024 | Q1 FY2024 | Q2 FY2023 | | :-------------------- | :-------- | :-------- | :-------- | | GAAP net income (loss) | $970 | ($9,358) | $3,204 | | Gain on sale of fixed assets | ($2,197) | - | - | | Goodwill impairment | - | $6,370 | - | | Non-GAAP net (loss) income | ($205) | ($634) | $2,683 | EBITDA and Adjusted EBITDA Reconciliation This section provides a reconciliation of GAAP net income (loss) to EBITDA and Adjusted EBITDA for the three and six months ended March 31, 2024, with Adjusted EBITDA including adjustments for items such as gain on sale of fixed assets, building move expense, inventory write-down, stock compensation, goodwill impairment, intangible asset impairment, and severance expense EBITDA and Adjusted EBITDA Reconciliation Table | Metric (in thousands) | Six Months Ended March 31, 2024 | | :-------------------- | :------------------------------ | | GAAP net income (loss) | ($8,388) | | Interest income | ($33) | | Interest expense | $391 | | Income tax provision | $281 | | Depreciation and amortization expense | $1,572 | | EBITDA | ($6,177) | | Gain on sale of fixed assets | ($2,197) | | Building move expense | $231 | | Write-down of inventory related to polishing equipment | $448 | | Stock compensation expense | $667 | | Goodwill impairment | $6,370 | | Intangible asset impairment | $1,279 | | Severance expense | $310 | | Adjusted EBITDA | $931 |