Good day, and welcome to the Amtech Systems Fiscal Fourth Year and Full Year 2024 Earnings Conference Call. Please note that this event is being recorded. 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 fourth quarter and full year 2024 conference call. With me on the call today are Bob Daigle, Chairman and Chief Executive Officer; and Wade Jenke, Chief Financial Officer. After close of market today, Amtech released its financial results for the fiscal fourth quarter and full year 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 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 within the Investor 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 expectations. Among the important factors, which could 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, excuse me, and the demand for products the effect of changing worldwide political and economic conditions, including trade sections, 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 Forms 10-Q, additionally, in today's conference call, we will be referring to non-GAAP financial measures as we discuss the fourth quarter financial and year-end results. You'll find a reconciliation of non-GAAP measures to our actual GAAP results included in the press release issued today. I would now like to turn the call over to Amtech's Chief Executive Officer, Bob Daigle.

Thank you, Erica. Well, good afternoon, and thank you for joining us today. As we conclude our fiscal year, I'd like to take a moment to reflect on the strides we've made to transform our business and strengthen our foundation for future growth. Looking back over the last 12-months, I'm proud of what our team has accomplished. We've made significant progress in streamlining our business with a specific emphasis on optimizing our operations, and delivering operating -- positive operating cash flow across all segments, even amid a strong secular downturn. While overall revenue was down 11% year-over-year in fiscal year 2024, we delivered $4 million of adjusted EBITDA profit compared to $1.8 million in fiscal year '23. Contributing to this result earlier this year, we implemented a comprehensive restructuring plan, which included organizational adjustments, cost reductions and operational enhancements. These efforts have translated into $7 million of annualized operating savings, making our business both more efficient and enabling us to mitigate the existing market dynamics more effectively. As a part of this initiative in early 2024, we took the strategic action to streamline our product portfolio by exiting from the unprofitable legacy equipment business at PR Hoffman, and investing in our more profitable and growing consumables business. This shift has paid off as sales of the consumable products at PR Hoffman surged by 28% year-over-year despite overall revenue growth of just 2%. Within our BTU business, with a sharp decline in demand for equipment, we've accelerated our shift to a hybrid manufacturing model, combining in-house production with outsourced capabilities. In addition to strengthening our supply chain, this initiative has allowed us to manage lead times, reduce capital expenditures, and enhance our operational flexibility. From a cost savings perspective, while these efforts remain ongoing, by the middle of the next fiscal…

Thank you, Bob. Net revenues for the fourth quarter decreased 10% sequentially and decreased 13% from the fourth quarter of fiscal 2023. The sequential decrease is primarily due to lower sales of our diffusion furnaces, reflow and wafer cleaning equipment, partially offset by higher consumable parts and service revenue. The decrease from the prior year is primarily attributable to lower sales across most of our product portfolio due to the slowdown in the broader semiconductor market. In the fourth quarter of our fiscal 2024 period, our GAAP gross margin increased by $7 million compared to the same prior year period. This is driven by better margin profiles, product mix and cost saves this year while in the fourth quarter of 2023, we had a $4.6 million intangible asset impairment charge and the $1.5 million write-down of inventory related to the polishing equipment line. On a sequential basis, GAAP gross margins in our Thermal Processing Solutions segment was positively affected by product mix attributed to increased revenue for parts and services as well as improved material costs. GAAP gross margin in our semiconductor fabrication Solutions segment slightly decreased on a sequential basis due primarily to less favorable product mix on consumables and equipment. Selling, general and administrative expenses increased by approximately $0.6 million on a sequential basis and decreased $2.3 million compared to the fourth quarter of 2023. The sequential increase is due primarily to increased consulting, audit and IT expenses. Compared to the same prior year quarter, the decrease is driven by the $0.5 million intangible asset impairment charge and lower labor and labor-related expenses as a result of our cost reduction initiatives as well as lower shipping on expenses and lower revenues. Research and development and engineering expenses increased by $0.3 million sequentially and decreased $1.6 million compared to…

[Operator Instructions] Your first question comes from the line of Craig Irwin from ROTH Capital Partners.

First, I should say, congratulations on the really good execution, bringing down costs. Tightening everything up in this environment that we're all operating through. So great, great execution there. My question is this, and it's a little bit high level, but you're renaming your segments, right? And that speaks for a refreshed and renewed strategic focus. Can you maybe call out some of the applications or opportunities where you think Amtech can participate in sort of AI and data center growth and electricity demand growth over the next several years? What do you see as relatively fresh products that you have to offer into this market? And how do you expect this to take shape as far as visibility for the investment community?

All right. Great. Great. Great. Yes. So let me start again at the high level. There were a couple of reasons for really revisiting our segment definitions. And some of it was, to be frank, I thought it was a little bit confusing. I think some of what we referred to as the semiconductor segment goes back to the days where Amtech was heavily involved with solar. So it was either a solar business or semi. And when I -- looking at the portfolio, a lot of what -- when I look at our business, we really have the semiconductor front end of our business, which is really involved in actual semiconductor device fabrication, which is again what will be -- and it's broader than just materials and substrates. A lot of what we do there is involved services and parts for that part of the business. And then what we've been referring to as the semiconductor segment is really back-end packaging and assembly of the electronics. So again, it was trying to clean this up and get clearer definition about we have the front end of our business, which is semi fab related, and then we have the back end, which is packaging and assembly and trying to get some clarity around that. Now then back to the strategic question of where do we grow, obviously, AI, everybody has been targeting AI as a growth driver for their business. We're no different. We play there. We have been playing there. Primarily on the back end, our reflow equipment, for example, is used extensively in terms of the advanced packaging applications for semiconductor production. We are also looking, however, at opportunities that are adjacent that would relate a little bit -- it's more on the consumables side where we are…

It goes a long way to answering the question. It actually starts to step into the secondary I really wanted to ask about -- so many of us following Amtech for the last number of years have been quite excited about the participation in the silicon carbide industry, the emerging power semiconductor technology that can be transformational to our economy, not just in electric vehicles, but in industrial equipment, military equipment, all sorts of things. And it appeared that Amtech was particularly well positioned on the consumables side to serve a niche in sort of consumables for wafer production. Can you maybe share with us your growth in the consumables business? Did you see absolute growth in cassettes and other materials supplied into the silicon carbon industry? That industry is going through a cyclical readjustment as you pointed out. There is absolute growth going on and are you seeing more growth in things like cassettes for 8-inch wafers and 6-inch wafers. Can you just talk about where the green shoots are in that industry?

Yes. So we -- again, yes, we've participated pretty broadly in and continue to do so in silicon carbide wafer production with our consumables out of PR Hoffman and as I mentioned, we saw a very substantial year-over-year growth in that PR Hoffman part of the business. 28% actually year-over-year in the consumables out of PR Hoffman. A lot of that was related to silicon carbide. So again, I think the luster and EV has dimmed a bit, and there's been some inventory corrections going on. So at least -- and this is purely opinion, Craig, but I do believe where people were expecting 30%, 40% market growth, EV related. We're likely to see something that's more in the, let's say, normalized 15%, 20%, still very substantial growth. But I think the wildcard in all of this is there's been so much investment in silicon carbide globally, and it's continuing, especially in Mainland China that there's a lot of effort right now, frankly, in expanding the application base for silicon carbide. So I think the expectations for silicon carbide growth where maybe people were saying 30%, 40% tied directly to EV have been somewhat tempered. I'm not so sure we're not going to see growth rates that approach those levels with the combination of what was going to be EV and these other application areas that everybody is focused on for expanding their base. So I'm still very optimistic, frankly, around the EV -- the silicon carbide growth driver for us. We participate broadly. It's a very attractive market application area. The enthusiasm is tempered around EV, but that may -- that I think will get offset at least to some degree by other applications.

[Operator Instructions] Your next question comes from the line of Mark Miller from The Benchmark Company.

I'd like to add my congratulations to the management, the cost management and the expectations for more cost reductions next year. I was just thinking -- I'm just trying to understand your cash went down $2 million last quarter. What is your outlook for cash flow generation over the next 6 months?

I can take that. So our cash flow generation will be partially fueled by our operation activities as we reduce inventory. And then, of course, our positive EBITDA in the future quarters.

Just note, Mark, we paid off. What was the number?

We paid off around $4 million.

Yes. So the reason cash went down as we've paid off the rest of our debt, right? We wanted to be debt-free. So we basically paid off $4 million, and we're done, no more debt right now.

Okay. So there's no more covenants or anything you have to worry about because you paid off your term loan and revolver.

Yes. And frankly, again, that was our focus, right, get the operations to be cash flow positive even during the downturn, be aggressive on working capital, get rid of the debt. Again, we -- big believer, we are going to control our own destiny on costs. We're going to control our own destiny in the medium, long term by our growth initiatives that don't just -- not just be reliant on market recovery, but look at expanding our business. And also, obviously, it will be nice it will be nice when the market actually does recover, which it will. I just don't know when that will be.

Your margins ticked up. You were saying there was mix. I'm just wondering, margin outlook ticked up is the highest of the year for the fourth quarter. I'm just wondering what you're thinking about in terms of margin outlook.

Yes, sure. So for our margin outlook, given the guidance for Q1 coming into fiscal year 2025 is going to be slightly close just under that Q4 performance, given what we're shipping out that quarter. But going in after that, we expect to be right in that range of 40% Yes. So a lot of the restructuring we did, Mark, was really aimed at that, right, is at similar volume revenue numbers, similar mix being in that 40-ish better? And then hopefully, with again, revenue should help that. Right. When revenue and more volume comes in, we'll get more operating leverage and get into some of that overhead at that cost of good solid level and we'll be able to enhance our margins -- sorry, part of that contract manufacturing strategy that Amtech has put in place will help yield even more results in the future.

R&D ticked up last quarter? Do you expect that to come back down in the third quarter for -- in terms of average for 2025?

It was that -- do you know R&D this quarter -- it was up a little bit -- it was a little bit offset from last quarter, honestly, some of our R&D costs pushed out into the Q4 from the Q3. So we're going to go pretty much back to our normal run rate if you average the 2 quarters.

Can you tell me relate what that is, please?

We should be right around $1 million for the quarter.

There are no further questions at this time. I will now turn the call back to Bob Daigle. Please continue.

All right. Well, thank you for joining our conference call today, and I'm looking forward to updating everybody on the progress we're making in the months to come. Thank you, and have a good evening.

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