AMTECH SYSTEMS INC

Amtech Systems, Inc. operates in the semiconductor equipment and consumables industry, providing equipment, consumables and services for semiconductor device packaging, wafer production and device fabrication. The company's products are used to fabricate and package semiconductor devices such as graphic processing units (GPUs) used in AI applications, silicon carbide (SiC) and silicon (Si) power devices and other optical, analog and digital devices. The semiconductor equipment industry is highly cyclical and volatile, with demand and profitability changing significantly from period to period due to factors including changes in global and regional economic conditions, the shift of semiconductor production to Asia, tariffs, quotas and international trade barriers, and changes in capacity utilization and production volume of manufacturers. The mature node semiconductor market is currently in a longer-than-historical-average contraction cycle, which the company believes is due primarily to a prolonged downturn in demand for personal computers and smartphones following a spike in demand during the COVID pandemic and a reduction in anticipated growth rates for EVs.

The company competes in several distinct equipment markets for semiconductor devices, semiconductor substrates, MEMS, semiconductor packaging, and electronics assembly, as well as the markets for supplies used in power semiconductor applications. Each of these markets is highly competitive. In the Thermal Processing Solutions market, principal competitors for solder reflow systems include ITW/EAE Vitronics-Soltec, Heller, Folungwin, ERSA, Shenzhen JT Automation Equipment Co., Ltd. and Rehm; for advanced semiconductor packaging, competitors include ITW/EAE Vitronics-Soltec and Heller; for horizontal diffusion furnaces, competitors include Centrotherm GmbH and CVD Equipment, Inc.; and for in-line controlled atmosphere furnaces, competitors include Centrotherm and SierraTherm/Schmid Thermal Systems. In the Semiconductor Fabrication Solutions market, Entrepix competes with other cleaning equipment providers including Screen and TEL, and with other companies specializing in refurbishment of older legacy CMP equipment including Axus Technology; Intersurface Dynamics competes with much larger companies such as Entegris, Inc. and Merck but focuses on niche applications. The company believes its reflow oven systems have leading market share with Outsourced Semiconductor Assembly and Test Services (OSATS) providers who perform advanced packaging of the AI chips.

The company generates revenue through the sale of equipment, consumables and services for semiconductor device packaging, wafer production and device fabrication. Net revenue consists of revenue recognized upon shipment or delivery of equipment, spare parts sales recognized upon shipment, and service revenue recognized upon completion of the service activity, which is generally ratable over the term of the service contract. The majority of revenue is generated from large system sales, so revenue, gross profit and operating income can be significantly impacted by the timing of system shipments. The company sells products to semiconductor device packaging, electronic assembly and device fabrication companies worldwide, with customers primarily being semiconductor chip packaging and electronic assembly companies, and manufacturers of semiconductor substrates and devices. The company operates in two reportable segments: Thermal Processing Solutions, which accounted for 73% of 2025 consolidated net revenue, and Semiconductor Fabrication Solutions, which accounted for 27%.

The Thermal Processing Solutions segment includes conveyorized reflow equipment for advanced semiconductor packaging and electronic assembly, high temperature conveyorized furnaces for power semiconductor substrate and electronic components manufacturing, and diffusion furnaces for SiC and Si power device production. This segment is comprised of the wholly-owned subsidiary BTU, a Delaware corporation based in Westford, Massachusetts, with operations in China, Malaysia and the UK, acquired in January 2015. Products include continuous thermal processing systems (convection reflow systems rated at up to 400°C operating in air or nitrogen atmospheres, available in four models based on heated lengths), high-temperature belt furnaces operating at temperatures up to 1180°C capable of processing in controlled atmospheres such as nitrogen, argon, and hydrogen, and horizontal diffusion furnaces for 200mm and 300mm wafers addressing diffusion, high temperature oxidation, and annealing steps. The equipment is manufactured in the company's facility in China and by contract manufacturing partners located in China, Canada and Singapore. For fiscal 2025, this segment generated net revenue of $58,057 thousand and gross profit of $20,566 thousand at a 35% gross margin.

The Semiconductor Fabrication Solutions segment includes consumables, equipment and services for wafer polishing, dicing and cleaning, comprised of the wholly-owned subsidiaries PR Hoffman (acquired July 1997), Advanced Compound Materials, Inc. (founded 2023), Intersurface Dynamics (acquired March 2021), and Entrepix (acquired January 2023). Products include substrate polishing templates used to hold SiC, silicon, sapphire or other wafer materials in place during single-sided wax-free CMP polishing processes; substrate carriers ranging from 3 to 38 inches in diameter using special steels, laminates and extruded polymer raw materials, available for all wafer sizes from 75mm to 450mm; substrate process chemicals through Intersurface Dynamics including Tensor Series Products, Vector Series Products, and Challenge Series Products; the Entrepix Double-Sided Wafer Cleaning System (OnTrak) which uses water or mild chemistries supplied through PVA brushes to clean both sides of a substrate simultaneously; the Entrepix Entegrity Head Tester, a table-top CMP head testing system; and CMP parts and service offering replacement parts for chemical mechanical planarization and cleaning equipment. For fiscal 2025, this segment generated net revenue of $21,307 thousand and gross profit of $6,417 thousand at a 30% gross margin.

During fiscal 2025, the company recognized impairment of its goodwill of $15.4 million at the Semiconductor Fabrication Solutions segment and $5.0 million at the Thermal Processing Solutions segment in the second quarter of fiscal year 2025, due to prolonged weakness in the mature node semiconductor market driven by high inventory, tepid demand, and geopolitical tensions. The company also recognized impairment of its definite lived intangible assets of $2.6 million at the Semiconductor Fabrication Solutions segment in the second quarter of fiscal year 2025. Severance expense was $0.7 million in 2025 related primarily to staff reductions across locations as the company shifted more work to contract manufacturers and dealt with decreasing demand. The company paid off and terminated its existing credit facility with UMB Bank in September 2024. During fiscal 2025, the company did not repurchase any of its equity securities, and as of September 30, 2025, there are no amounts authorized for repurchase. The company had 14,354,797 shares of common stock issued and outstanding as of September 30, 2025.

For fiscal year 2025, total net revenue was $79,364 thousand, a decrease of $21,850 thousand or 22% from $101,214 thousand in fiscal 2024. Net loss was $30,326 thousand compared to a net loss of $8,486 thousand in the prior year. Gross profit was $26,983 thousand, a decrease of $9,248 thousand or 26% from $36,231 thousand, with gross margin declining to 34% from 36%. Operating loss was $28,488 thousand compared to an operating loss of $6,729 thousand in fiscal 2024. The company reported a loss before income taxes of $27,992 thousand and an income tax provision of $2,334 thousand. Net loss per basic and diluted share was $2.12 compared to $0.60 in the prior year. Cash and cash equivalents at year-end were $17,904 thousand, up from $11,086 thousand at the beginning of the year.

The company identifies three key secular trends important to future growth: Artificial Intelligence, where the company believes its reflow oven systems have leading market share with OSATS providers performing advanced packaging of AI chips; Supply Chain Resiliency, driven by a global trend of expanding and/or relocating operations outside of mainland China, which the company believes will create demand for new equipment and services in growing regions like Southeast Asia and Mexico; and Advanced Mobility, encompassing the development and adoption of electric vehicles and charging infrastructure (EV and HEV) as well as advanced automotive electronics including ADAS, infotainment and telematics, with products intersecting these markets through CMP consumables and wafer cleaning systems for SiC substrates used in EV power inverters, thermal processing systems for producing EV battery cooling systems and ceramic substrates for HEV power semiconductor packaging, and reflow ovens for ADAS, infotainment and telematics component assemblies.

The company continues to invest in research and development to expand its Thermal Processing Solutions reflow equipment product-line for AI applications, with the goal of expanding its addressable market by enabling mass production of higher density packages. The company is also investing in application development and R&D resources to accelerate growth of its Semiconductor Fabrications Solutions business by expanding its consumables product portfolio and providing exceptional technical support and service to customers. The company has migrated to a semi-fabless manufacturing model for the majority of its capital equipment business to improve its ability to scale production and reduce fixed costs, with manufacturing partners providing a cost-effective alternative to in-house production and helping mitigate the financial impact of variable demand inherent to the capital equipment business.

The company has migrated to a semi-fabless manufacturing model for the majority of its capital equipment business to improve its ability to scale production and reduce fixed costs. Manufacturing partners provide a cost-effective alternative to in-house production and help mitigate the financial impact of variable demand. The company is using contract manufacturer facilities in Canada and Singapore, and is also using a CM partner as well as its Shanghai factory as backup sources to manufacture key components for certain high temperature belt furnaces. The company expects capital expenditures to decrease slightly in 2026, as it has completed its relocation projects and continues to pursue optimization projects to implement new technology across its divisions. As of September 30, 2025, the company employed 264 people, with 35% engaged in manufacturing, 18% in sales and service, 12% in research, development and engineering, and 35% in other roles.

The company's capital allocation strategy focuses on building shareholder value by first investing in R&D and capital expenditures to strengthen its competitive position, then supplementing and strengthening capabilities through acquisitions and strategic investments, and finally providing returns to stockholders. Historically, R&D efforts have focused on upgrades to existing product platforms as well as new product designs, and capital expenditures consist primarily of capacity expansion as well as investments in IT systems. The company has never paid dividends on its common stock and does not expect to pay dividends on common stock in the foreseeable future. As of September 30, 2025, there are no amounts authorized for share repurchase. In fiscal 2025, the company did not repurchase any of its equity securities.

The company faces structural headwinds including the cyclical nature of the semiconductor equipment industry, which is highly cyclical and volatile, with demand and profitability changing significantly from period to period. The mature node semiconductor market is currently in a longer-than-historical-average contraction cycle, which the company believes is due primarily to a prolonged downturn in demand for personal computers and smartphones following a spike in demand during the COVID pandemic and a reduction in anticipated growth rates for EVs. The company also faces risks from geopolitical tensions, including U.S. export control restrictions adopted by the U.S. Department of Commerce's Bureau of Industry and Security that could negatively impact business in China, and tariffs and trade barriers. In fiscal 2025, 71% of net revenue came from customers outside of North America, with 22% from China, exposing the company to risks associated with changes in the economies and policies of those countries.

The company faces execution risks related to its semi-fabless manufacturing model, including reliance on contract manufacturers in Canada and Singapore, with inherent risks in starting up new factories or expanding production capacity, and risks to moving production to different contract manufacturers which could increase costs and reduce operating results. The company also faces risks from supplier capacity constraints, production disruptions, quality issues or price increases, as it procures some key parts from a single supplier or limited number of suppliers, including specialized steel mills in Germany and Japan, an injection molding machine, a single-sourced pad supplier from Japan, and an adhesive manufacturer. Additionally, the company faces risks from its inability to attract, train and retain effective employees and management, with total employee turnover of 33.1% in 2025, of which approximately 37.8% was voluntary.

The semiconductor equipment industry is highly cyclical and volatile, and the mature node semiconductor market is currently in a longer-than-historical-average contraction cycle, which the company believes is due primarily to a prolonged downturn in demand for personal computers and smartphones and a reduction in anticipated growth rates for EVs. The company faces significant geographic concentration risk, with 71% ¹ of net revenue in fiscal 2025 coming from customers outside of North America, including 22% ² from China, exposing the business to changes in the economies and policies of those countries, as well as U.S. export control restrictions that could limit the company's ability to sell products to customers in China. The company relies on a limited number of customers, and as of September 30, 2025, two Thermal Processing Solutions customers represented 15% ³ and 13% ⁴ of accounts receivable. The company also depends on key suppliers for certain materials, including specialized steel mills in Germany and Japan, a single-sourced pad supplier from Japan, and an adhesive manufacturer, and procures some key parts from a single supplier or limited group of suppliers. The company recorded goodwill impairment of $20,353 thousand ⁵ and intangible asset impairment of $2,569 thousand ⁶ in fiscal 2025 due to prolonged weakness in the mature node semiconductor market, and inventory write-downs of approximately $6,550 thousand ⁷ compared to $2,813 thousand ⁸ in the prior year, reflecting the risk of excess and obsolete inventory in a rapidly changing technological environment.

Management's message emphasizes the company's strategy to focus efforts on fully capitalizing on advanced packaging equipment opportunities driven by AI infrastructure investments and expand its consumables and service business for semiconductor fabrication by providing exceptional service and high-quality products to underserved segments of the market. The company's core values of Safety, Customer Focus and Continuous Improvement are stated as critical to the company's success. Management identifies three key secular trends important to future growth: Artificial Intelligence, Supply Chain Resiliency, and Advanced Mobility. The company continues to invest in research and development to expand its Thermal Processing Solutions reflow equipment product-line for AI applications, with the goal of expanding its addressable market by enabling mass production of higher density packages. Management states that the company has migrated to a semi-fabless manufacturing model for the majority of its capital equipment business to improve its ability to scale production and reduce fixed costs. The company believes that the continued expansion of its consumable and after-market product offerings, primarily in its Semiconductor Fabrication Solutions segment, will enable it to partially offset some of the cyclical effects of the semiconductor industry. Management also notes that the company believes the accelerated investments in Artificial Intelligence infrastructure and increased investments in defense and aerospace applications will help drive future growth.