Good day, and welcome to the Amtech Systems' Fiscal Third Quarter 2024 Earnings Call. Please note that this event is being recorded and simultaneously webcast. I would now like to turn the call over to Erica Mannion of Sapphire Investor Relations. Please go ahead.

Good afternoon and thank you for joining us for Amtech Systems' fiscal third quarter 2024 conference call. With me on the call today are Bob Daigle, Chairman and Chief Executive Officer and Lisa Gibbs, Chief Financial Officer; and Wade Jenke, Incoming Chief Financial Officer. After close of market today, Amtech released its financial results for the fiscal third quarter 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. 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 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 would cause actual results to differ materially from those in the forward-looking statements are changes in the 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; 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. 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 referring to non-GAAP financial measures as we discuss the third quarter financial results. You'll find a reconciliation of these non-GAAP measures to our actual GAAP results included in the press release issued today. Now, I would like to turn the call over to Amtech's Chief Executive Officer, Bob Daigle.

Good afternoon, everyone. Thank you for joining Amtech's quarterly conference call. In the third quarter, we continued to optimize our cost structure to match the current demand environment and lay the foundation for meaningful operating leverage as the markets we serve recover. Revenue of $26.7 million exceeded the high end of our guidance range, and our adjusted EBITDA was $2.3 million. I'm pleased that we're beginning to see the financial benefits of the actions we've taken over the past few quarters. The macroeconomic landscape for our end markets remains somewhat mixed. Within the semiconductor industry, we have begun to see incremental improvement in demand for advanced packaging applications. While we have not seen a sharp recovery, we are seeing a gradual increase in demand from the cyclical lows of the past few quarters. Based on quoting activity and discussions with our customers, we expect to see continued improvement. Offsetting this incremental tailwind, we have experienced a softening of demand for our horizontal diffusion furnaces since these tools are primarily targeted for power electronic semiconductor applications in automotive and industrial markets. While this impacts both our backlog and the future revenue in the near term, our overall profit levels remain neutral, as the contribution margin from these products was significantly lower than our corporate average. Within our materials and substrates end markets, we are seeing a stabilization in overall demand. Although demand for consumables used for semiconductor fabrication remains somewhat lumpy, the demand for replacement parts continues to improve. Taken together, we believe we've passed the trough in demand for this segment, although we do not expect a sharp recovery in the near term. While we await the rebound in demand across broader markets, we are continuing to focus on optimizing our operations. In the third quarter, we completed the relocation…

Thank you, Bob. Net revenues increased 5% sequentially and decreased 13% from the third quarter of fiscal 2023. The sequential increase is primarily due to increased sales of our reflow and wafer cleaning equipment and higher parts and services revenue. 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. In the third quarter of fiscal 2024, GAAP gross margin increased sequentially compared to the same prior year period. On a sequential basis, GAAP gross margin in our semiconductor segment was positively affected by product mix, contributed to increased revenue for refill equipment, parts and services. GAAP gross margin in our Materials & Substrates segment decreased on a sequential basis due primarily to a less favorable product mix of consumables and equipment. Compared to the same prior year period, GAAP gross margin was relatively consistent between periods. Selling, general and administrative expenses decreased approximately $40,000 on a sequential basis and decreased $2.1 million compared to the same prior year period. The sequential decrease is due primarily to reductions in labor-related expenses, partially offset by increased commissions and shipping expenses on higher sales. Compared to the same prior year period, the decrease is due primarily to lower labor and labor-related expenses as a result of our cost reduction initiatives, as well as lower shipping expenses on lower revenues. Research, development and engineering expenses decreased $0.2 million sequentially and decreased $1.1 million compared to the same prior year period, with a sequential decrease due primarily to the timing of purchases related to specific projects in both segments and the decrease from prior year attributable to development efforts in our Material & Substrates segment that did not recur. GAAP operating income was $0.8 million compared to GAAP…

Thank you, Lisa. I would like to take a moment to recognize and thank Lisa for her contributions to Amtech over the past eight years. Lisa's commitment to the company and our professional excellence has been invaluable, and I wish her great success with her new role. I'm pleased to welcome Wade Jenke, Amtech's new CFO. Wade has over 15 years of financial and operational experience with global companies. Most recently, he served as the CFO of the EMS Group at ASSA ABLOY, a $30 billion publicly traded company headquartered in Sweden. Prior to that, he served in a number of senior financial roles within ASSA ABLOY and BAE Systems, spanning SEC reporting, FP&A, cost accounting and manufacturing accounting. He has also led back in acquisition integrations and ERP implementations. I'm excited to welcome Wade to our team. His experience in both financial and operational functions will greatly contribute to our efforts to fully optimize our operations and create greater shareholder value in the quarters and years ahead. Welcome aboard Wade.

Thank you, Bob, and hello to everyone on the call today. I'm excited to join Bob and the talented team at Amtech. I firmly believe and Amtech has the potential for significant growth in revenue, profit and cash flow given the company's leadership position in the markets that it serves. I look forward to the exciting journey ahead and getting to know many of you personally soon. I will now turn the call over to the operator for questions. Operator?

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session [Operator Instructions] Your first question comes from Mark Miller with Benchmark. Please go ahead.

Please, I'd like to wish you best in your new endeavor and Wade. I welcome to the Amtech conference call.

Thank you, Mark.

You're welcome. Talking about some pricing actions, what areas were these pricing actions taken...

Yes, Mark, as we commented earlier, a lot of it has been -- let me start by saying it is broad. So we -- most of the parts of our business, we felt we needed to take some actions to deal with the inflationary pressures over the past 18, 24 months. So to answer your question more directly, it has been brought across our portfolio. But I would say disproportionate has really been more on the -- on some of the equipment that we're manufacturing, where I think the inflationary pressures in the parts and different components in our systems have been particularly significant and we needed to deal with.

General Motors and Ford both recently reported strong results for their EV sales. And have you seen any impact from that or any in terms of quoting activity? Any thoughts that's positive for your future outlook?

Yes. I think I do continue to view EV as having some pretty nice tailwinds. I think some of the -- however, the improved results we've seen out of the more traditional automakers has been somewhat offset by the weakness in -- from the market leader in terms of overall demand in the power electronics area. One of the things that I also think is encouraging, Mark, for us is the again, they've tempered expectations in terms of full electric vehicle growth rates, but they're still fairly substantial. So I think that's a nice secular tailwind. But I also believe that what we're beginning to hear more about is the probably a stronger push to hybridize, replace traditional ICE vehicles with more of the hybrid vehicles given strong consumer acceptance for those vehicles in order to meet the fuel efficiency requirements. So -- and then again, that's helpful to us because we do play broadly in the power electronics equipment and consumables area. So I do think that when we look at the puts and takes of kind of a more tempered full EV outlook with an increasing projections for the hybrid electric vehicle side of things. We actually see that net-net as somewhat favorable to us.

You mentioned the reflow business that was one of the drivers for the upside sales. Are you seeing increased quoting activity? What does it look like this will continue?

Yes, Mark. Both shipments have been quoting activity is up -- and more importantly, I would say, the mix is -- we're seeing an improved mix there. And what had really softened tremendously was the packaging side of the business, because we manufacture reflow equipment that's used for packaging, advanced packaging as well as traditional surface mount assembly. And what we're seeing is we've seen several quarters where we have sequentially increased demand for the packaging side of the business. And that comes in at a higher margin for us and a higher ASP than the surface-mount equipment.

I just have a couple of housekeeping issues. I'll jump back in the queue. On the cash from operations and CapEx were for the quarter?

I've got the year-to-date numbers in front of me here, Mark. We had cash provided by operations of $9 million, which is great year-to-date and CapEx, a little bit over $5 million. We finished the build-out of that building in Massachusetts, which was a significant part of our CapEx. And I would say in the nearer term, I would expect that to be more just maintenance type of CapEx.

Okay. So these were year-to-date over the last three quarters? Okay. Thank you.

Thank you. [Operator Instructions] Your next question comes from Kevin Garrigan with Westpark Capital. Please go ahead.

Yes. Hey, guys. Thanks for letting me ask a few questions. Bob, I think I may have asked you this last time, but has anything gotten better or worse versus three months ago in the market to kind of give you hope that things maybe turning around or getting better for your businesses?

Yes. No. Yes, I'd say generally more positive. I think the areas that clearly seen some rebound, I would say, are parts side of the business, as we mentioned -- because again, some of the -- that had a lot of the parts business and service side of things that kind of dried up to a great degree about six months ago or so. And we've seen incremental improvement in people maintaining equipment and parts replacements. And then, of course, I think what's very significant here is the fact that we're nowhere near peak demand for the reflow equipment, but sequentially, we're seeing improvements in demand and in particular, chip packaging. I really -- I would say in the consumables area, as I mentioned, that's lumpy. I would still characterize it as stable. It's not always consistent, but we're not seeing either a significant headwind or tailwind in that area. And in general, I wouldn't say that it seemed -- I mean, my sense is that we saw the bottom in the industry a couple of quarters ago. And that although we had all hoped for this V-shape recovery, the sharp recovery in the markets we serve, we're not seeing that, but at least we're seeing some incremental improvements.

Okay. Got it. Yes, I've heard similar that we're kind of just bouncing along the bottom at this point. Everyone's kind of still waiting. Yes, and then….

I can just add something. And that's kind of -- again, our strategy, our approach has really been to we can't deal with the market demand conditions, but we can deal with our cost structure and our operating performance. And that's really while we wait for something more substantial, as you point out, maybe things are bouncing a lot at the bottom is make sure as things are bouncing along the bottom, we're financially in good shape and doing the best we can to drive EBITDA.

Yeah, absolutely. That makes a ton of sense. Okay. Perfect. And then just as a follow-up, Lisa, congrats on the new role in Investor left going forward. Can you just give us the focus for Amtech in terms of capital allocation for the rest of 2024? And is M&A kind of a bit of a focus for you guys?

Yeah. I would say that with the continued focus on positive EBITDA generation, even as we kind of bounce along here at the bottom, as we were saying, we finished that build out of the building in Massachusetts. And here in the near term, I think we kind of returned to a maintenance CapEx reran our annual budgeting cycle here in the next month or 2. So I would expect potentially a little bit more CapEx next year as Bob and Wade, look at areas to invest in the business. On the M&A front, I will turn that back to Bob so I keep the more forward-looking person at this table right now.

Yeah. I would say in the current environment, not in the short term, but I do think it's definitely something that we're starting to dig into more in the medium term in terms of how to deploy capital to enhance growth.

Okay. Perfect. I appreciate the color. Thank you.

Thank you. [Operator Instructions] There are no further questions at this time. I will now turn the call back over to CEO, Bob Daigle for closing remarks.

Well, thank you again for joining our conference call, and I look forward to updating you on the progress we're making in the coming months. Have a good afternoon, evening, everyone.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.