Amtech Systems, Inc. Stock

Thank you. Good day and thank you for standing by everyone and welcome to the Amtech Systems Fiscal 2026 Third Quarter Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2. Please note this event is being recorded.

I would now like to turn the conference over to Jordan Darrow of Darrow Associates Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. We appreciate you joining us for the Amtech Systems Fiscal 2026 Third Quarter Conference Call and Webcast. on the call today are Bob Dale, Chairman and Chief Executive Officer. sector president and chief operating officer, and Tom Sable, chief financial officer. After After close of market today, Amtec released its financial results for the third quarter of fiscal 2026. The earnings release is posted on the company's website at www.amtecsystems.com in the investor section. Be sure to second press release after the market closed today, also available on the website, addressing executive appointments and transitions, which will be discussed during today's conference call as well. Before we begin, I'd like to remind everyone that Safe Harbor Disclaimer and our public filings cover this call and the webcast. the comments we make 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 on the investor section of our corporate website. The company assumes no obligation to update any such forward-looking statements.

Your caution to not place undue reliance on forward-looking statements, which speak only as of today. These statements are not guaranteed as a future performance, and after-results can differ materially from current expectations. Among the important factors which could cause after-results to differ materially from those in forward-looking statements are changes in technology used by customers and competitors, change in volatility, and the demand for products. If Effective change in worldwide political and economic conditions, including trade sanctions, and the effect of overall market conditions, including equity in credit markets and market acceptance risks, ongoing logistics, supply chain, and labor matters 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 referencing non-GAAP financial measures as we discuss the financial results for the third quarter. You will find a reconciliation of those non-GAAP measures to our actual GAAP results included in the press release issued today.

And I'll turn the call over to Amtech's Chief Executive Officer, Bob Daigle. Thank you, Jordan. As Jordan mentioned, we made two announcements after the market closed today. The first was our third quarter earnings, highlighted by continued strong AI-related growth. Another announcement was in connection with the Chief Executive Officer transition for the company. I'll start by addressing our third quarter results. Revenue for the quarter was $22.4 million, up 14% year-over-year and at the top end of our guidance range. Strong AI-related demand within our thermal processing solution segment drove growth during the quarter that was partially offset by weaker sales in our semiconductor fabrication solution segment.

AI-related revenue for our thermal process solution segment was very strong, up by approximately 120% from the prior year period. Profitability exceeded guidance due to the strong operating leverage generated by our semi-fabulous model and other enhancements made during the past two plus years. Gross margin increased to 50 percent for the quarter and adjusted EBITDA of 3.3 million approached 15 percent of sales. The combination of higher revenue margins and disciplined execution also continue to support strong cash generation. Our thermal processing solution segment delivered excellent results for the quarter. Year over year, revenue grew by almost 25% due to robust demand for AI-related equipment, which accounted for more than 40% of segment revenue. In addition, parts and services revenue increased by approximately 30% compared to the same quarter last year, reflecting the continued success of our customer outreach initiatives.

As broadly reported, semiconductor manufacturers, OSATs, and other participants in the AI supply chain continue to expand capacity to support significant AI infrastructure investments. Advanced packaging continues to serve as a critical enabler of artificial intelligence by supporting increasingly complex semiconductor architectures. Capital equipment capable of delivering high yields, excellent throughput, and highly repeatable process performance remains essential to supporting this growth. Demand for our advanced packaging equipment and AI server board assembly solutions remains exceptionally strong due to our differentiated capabilities, including TrueFlat technology and an industry-leading temperature uniformity. The book-to-bill ratio for our thermal processing solutions segment approached 1.4 in the quarter, driven by AI-related equipment demand. This is our third consecutive quarter where our book-to-bill exceeded one. Despite our relatively short lead times, we are seeing a significant increase in booking scheduled for shipment in future quarters, providing confidence that AI-driven demand will continue to be a meaningful growth driver.

In addition, an exciting new development during the quarter was the receipt of our first order for equipment used in the production of cooling components for AI semiconductors. This application expands our participation in AI infrastructure build-out beyond advanced packaging and server board assembly and represents another attractive growth opportunity for our business. To accelerate growth beyond 2027, our teams are developing new equipment platforms and process capabilities designed to support emerging semiconductor applications and higher density packaging requirements. We plan to introduce some of these new products and capabilities at the Semicon Taiwan trade show in early September. We believe these new capabilities and products should significantly expand our addressable market and help support sustainable growth in the years ahead. Turning to our semiconductor fabrication solution segment, the year-over-year revenue decline was primarily driven by a significant reduction in demand for our PR Hoffman templates used in silicon carbide substrate manufacturing. Unfortunately, due to structural changes in the silicon carbide industry, we do not expect meaningful recovery in demand.

To revitalize growth in this segment, our strategy remains focused on serving customers and applications that are underserved within the industry. We're continuing to invest in customer outreach and engagement initiatives to grow our parts and services business and new product development to grow our specialty chemicals business. At Intrepix, our parts and service business delivered another strong quarter with revenue increasing 19% year over year. While we invest in revitalizing growth, the SFS business is making some contribution to our overall profitability by covering a portion of our corporate overhead costs. Across Amtec, the operating leverage and working capital efficiencies created through our product line rationalization efforts and transition to a semi-fabless operating model over the past two plus years continues to deliver meaningful value. We ended the quarter with $83.1 million of cash, including $56.5 million of net proceeds from an oversubscribed public offering of nearly 3 million shares of common stock, which was essentially done at market price. Excluding the capital raise, cash at the end of the quarter was up $2.2 million from the prior quarter and $11 million from the prior year.

While we're pursuing additional growth capital, while we weren't pursuing additional growth capital, we felt the timing was right to opportunistically bolster our balance sheet in anticipation of opportunities to supplement organic growth with synergistic acquisitions. Before Tom provides more details concerning our financial performance, I'd like to briefly address the leadership transition we announced today. After serving as Chairman and Chief Executive Officer for the past three years, I will transition to the role of Executive Chairman, and Guy Schecter will assume the position of Chief Executive Officer. has also been appointed to our company's board of directors. This transition is a result of a thoughtful, successful planning process led by our board of directors and reflects a commitment to strong corporate governance, leadership continuity, and long-term value creation. As Executive Chairman, I will be working closely with Guy to ensure a seamless transition and remain actively involved in supporting our long-term growth strategy. Since joining Amtech earlier this year as President and Chief Operating Officer, Guy has quickly established strong connections with our customers, partners, and employees while helping to further align our operations, growth initiatives, and product development efforts. We'll now turn the call over to Guy so he can introduce himself and provide some additional background.

Thank you, Bob. I appreciate the confidence that you and the board have placed in me, and I'm honored to lead Amtik as we enter this next phase of growth. I look forward to working with you, the board, and the Amtik team to build on the company's strong foundation and continue advancing our strategy. I bring more than 25 years of leadership experience in semiconductors and advanced packaging equipment industries, including product management, operations services, and general management. Prior to joining Amtik, I held senior leadership roles at Yield Engineering Systems and Vico Instruments where I focused on developing high-performing teams, delivering differentiated products and services, and driving profitable growth. Since joining Amtech earlier this year, I've spent time across our global operations and with customers around the world. Those discussions have reinforced my confidence in the strength of Amtix brand, the depth of our customer relationships, and the opportunities we have to expand our presence in attractive growth markets. We see strong demand for technologies that enable AI-driven semiconductor manufacturing and advanced packaging.

Amtech is well positioned to capitalize on these trends by strengthening its core businesses, expanding the technology portfolio, and increasing our participation in key process steps. across customers' manufacturing roadmaps. I'm excited about the opportunities ahead and confident in our ability to execute, support our customers, and create long-term value for our shareholders. With that, I'll turn the call back to Bob. Thank you, Guy.

I'm very pleased that Guy is stepping into the CEO role and believe this is the right time to execute this transition. Amtek is entering an exciting new phase of growth with strong momentum in our thermal processing solutions business that includes expanded opportunities in advanced packaging and AI infrastructure applications, has a well-established asset-light business model that delivers strong operating results, and has an exceptional a exceptionally strong balance sheet. I'm excited about the future and confident that Antec's best days remain ahead of us. Now I'll turn the call over to Tom for more details concerning our Q3 results.

Thank you, Bob. It is my pleasure to review the financials for the fiscal 2026 third quarter. Following the two-year plus transformation led by Bob, the company is at a place where year-over-year revenue comparisons are meaningful. That began with our second quarter and will be my focus on presenting our financial performance today. AI product demand continues to drive our consolidated growth. namely within our TPS segment. TPS revenue of approximately $17.7 million was up nearly 25% year over year. driven by continued strength in AI-related equipment demand and parts and services revenue in support of a growing install base. 90% of TPS revenue in the third quarter of 2026 is related to parts and services. In the third quarter of 2026, AI revenues accounted for more than 40% of TPS segment revenue, up from a 30s handle in the prior year period. Bookings for AI applications remain strong, and we are experienced both book and ship in the same quarter, as well as book now and ship later on.

As a result, our backlog is building for the current quarter as well as into Q1 and Q2 of fiscal 2027. For the third consecutive quarter, company-wide bookings exceeded sales for the period. As mentioned, the SFS segment has lagged, so our growth is being carried by our TPS segment, again, notably for sales related to AI equipment. Total SFS revenues were 4.6 million in the third quarter, down just over 13% from the same period a year ago. primarily as a result of weak demand for PR Hoffman silicon carbide related products. Moving on to gross margins. Once again, the company's product line rationalization and our focus on growing higher margin product lines, including AI advanced packaging solutions as as well as our recurring parts and services business, are delivering their intended results particularly as we are also benefiting from greater scale. Overall gross margins as a percentage of sales increased to 50% in the third quarter of 2026. nearly 400 basis points from 46.7% in the third quarter of 2025. Selling general administrative expenses increased approximately 600,000 from the prior year quarter.

The increase is primarily due to expanding business activities. compensation including executive transitions, and tax and ITC consulting fees. research development and engineering expenses more than doubled from the prior year but we relatively flat compared to Q2, although we expect this may increase in the coming quarters as we build out our platform to address next gen and tangential opportunities. GAP net income for the second quarter of fiscal 2026 was approximately $1.7 million, or $0.10 per diluted share. This compares to gap net income of approximately $100,000 or one cent per share for the prior year period. In the third quarter of 2026, we recorded approximately $300,000 in non-cash charges, primarily due to the sublease of our previously closed ACMI Spartansburg facility, related to the disposal of certain fixed assets and an impairment of the ROU lease asset. HOWEVER, WE WILL BE RECOUPING APPROXIMATELY 87% OF THE MONTHLY FUTURE LEASE EXPENSES FROM THE SUBLEASE. The company also recorded approximately $400,000 of stock-based compensation expense in Q3 2026. The company's gap net income includes approximately $400,000 of foreign currency exchange losses in the third quarter of 2026, as compared to $100,000 in the prior year period. primarily driven by a weakening US dollar against the Chinese renminbi.

UNRESTRICTED CASH AND CASH EQUALITIES AT JUNE 30, 2026 WERE 83.1 MILLION COMPARED TO 24.4 MILLION AT MARCH 31, 2026, AND 17.9 MILLION AT DECEMBER 31, 2025. The increased cash balance at the end of the third quarter is due primarily to the company raising $56.5 million of net proceeds from a $60 million oversubscribed public offering of common stock in June. The company continued to benefit from operational cash generation, working capital optimization, strong accounts receivable collections from customers, and accounts payable management, and generated $1.1 million in cash flow from operations during the fiscal third quarter of 2026. The quarter and cash balances reflect that. An additional $1.7 million in inventory from the beginning of the fiscal year to accommodate the increased backlog and order flow in our TPS business segment. The company continues to have no debt. As for the $5 million stock repurchase program, The company did not use any cash for this during the quarter, and no shares have been repurchased since the plan was put in place in December of 2025.

Now turning to our outlook, for the fourth fiscal quarter ended September 30th, 2026, the company expects revenue to be in the range of 22 and a half million to $24 million. With regards to adjusted EBITDA, the company expects to benefit from its operating leverage and consolidated top line growth to deliver adjusted EBITDA margins in the low to mid teens. Again, AI-related equipment sales for the thermal processing segment are anticipated to drive the majority of our revenue growth and account for well over 40% of the segment sales in the fourth quarter of 2026. At the same time, we remain disciplined on the SFS side of the business, where mature no demand has yet to meaningfully recover, and we are managing costs and working capital accordingly. The outlook provided today during our call and in our earnings release is based on an assumed exchange rate between the United States dollar and foreign currencies. changes in the value of foreign currencies in relation to the U.S. dollar could cause the actual results to differ from expectations. And I will now turn the call over to the operator for questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assess the question. our roster. Your first question comes from Craig Irwin with Roth.

capital partners. Hey, guys. Andrew on for Craig. Congrats on the progress. First of all, thank you to the partners who have been so supportive of this. We're really grateful to the one for me he had a nice jump in a TPS backlog can you kind of just help us understand how long you kind of expect that backlog to convert to revenue and the timing there.

Primarily over our fiscal, we're going into, this is our fiscal fourth quarter, we're expecting it to carry into primarily first quarter and some into the second quarter of our fiscal year 27.

Perfect, understood. And then second from me, just within your existing silicon carbide cutting Can you remind us kind of what the mix is currently of EV versus, you know, defense, medical, any other industrial customers and maybe any pockets you do see potential areas for growth?.

Yes, I kind of alluded to this. We've seen a marked decline in silicon carbide demand, and I'd say it's really de minimis at this point. And I don't really envision a meaningful recovery in demand for our silicon carbide products. We've really de-emphasized that going forward and restructured the business accordingly and really have the majority of our effort continues to focus on driving growth in our AI infrastructure equipment. for AI infrastructure equipment, and then, again, developing our specialty chemicals business and our parts and service in the mature and old world. That's where we see the big opportunities. So I really don't... you know, really we don't focus a lot of time on what's happening in silicon carbide anymore.

I understand. Well, thanks for taking my questions, and I'll hop back into queue.

All right. Thank you. Your next question comes from Scott Buck with Titan Partners.

Hi, good afternoon, guys. Just kind of a follow-up on the backlog. I'm curious how much of that uptick, maybe a few large hyperscaler or OSAT orders versus a more kind of broad step up? just trying to understand what, you know, how bumpy that is. Yes.

So we, yes, no, we're, you know, our equipment is agnostic in terms of what's available. where it ends up in terms of the, we're shipping to the OSATs and we're shipping to major OEMs. And it really doesn't matter which hyperscaler it goes into. And frankly, our equipment would also be used across the spectrum, whether you're talking, you know, all the various GPU, TPU equipment. applications would all use the same equipment. So we aren't really tied. We're tied really to overall demand in these infrastructure build-outs, not necessarily specific to any one player. Yes.

customer. Okay. That's helpful, Bob. And then I wanted to ask about the, uh, Q4 margin guide. It looks like you're guiding revenue flat to up. Yes. But margin came in at 15%, EBITDA margin came in at 15% in the third quarter. But the language suggests kind of low to mid-teens. seems to imply maybe a margin step down or maybe that's just some conservatism what how do you mean thinking about that.

You know, again, it always depends a lot on mix. But, again, when we say low teens, 13 is the first number in the team, right? It's not 11 or 12. Those aren't teens. So we think of 15 kind of being in that low to mid range.

teens range. That's how we think about it. Okay. Um, I'm nitpicking here, I guess. Um, And then last, I was hoping to maybe get a little bit more color on capital deployment given the balance sheet strength. You know, what does the M&A environment look like? Would something make sense? Or How do you think about, you know, kind of prioritizing things organically? Yes, so our –.

You know, we've got these, I think, very strong tailwinds, obviously, associated with AI infrastructure build-out. we would, our vision for the future, our strategy for the future is really to try to expand our participation. that's one area where we would look to potentially deploy capital. And again, um, Whenever anybody asks me about M&A, I say maybe, because there's a lot of things that have to be in the way. in place for it to make sense. When we say synergistic acquisitions, one of the key criteria for us is making sure that, uh, anything we bring into the fold does create good return on invested capital. So you might imagine some things we would explore are capabilities we can build on to expand our capability in AI. You could potentially envision things where, you know, we did a lot to really change our financials through business, changing our business model. So to the extent there were opportunities to bring things in where we could create value by, you know, implementing a similar business model, that could be interesting. So I would characterize it as, I'd say, You know, it's an addition to what we see as strong organic growth, but, you know, it will depend on what's available at what kind of valuations in terms of how we execute on that in the next coming quarters.

That makes a lot of sense. Well, I appreciate the added color, guys. Thank you for the time.

All right, thanks, Kim. Once again, if you wish to ask a question, please press star 1 on your telephone. and wait for your name to be announced. Your next question comes from George Marema with Pareto Ventures.

Yes, hi, thanks for taking my questions. Bob, I was wondering if you could give a little more color on this. You said you got a first order on a cooling application. Can you kind of expand on that a little bit?.

Yes, it's basically direct. The application is really geared towards removing heat from directly from the semiconductors. You know, it's an efficient way. It's a relatively new trend, we believe, in the industry. And one of our customers for equipment is basically building their process around our equipment to do so. So it's an interesting application And it's similar to what we were doing back when there was a lot of build out of EV. You know, EV was a booming business. We were selling equipment that was used to do heat exchangers for EV batteries.

And this is very similar technology that's being applied to cooling semiconductors and data centers.

Would you characterize the opportunity as like a small little niche thing or more than that?.

It's too early to tell, George. I think it's an interesting, you know, we've talked about this before, I mentioned that, you know, one of our goals is really to expand what we do in the AI infrastructure space. I think this was a significant step. success story we thought was important in terms of our efforts starting to pay off in this pivot. But I can't really characterize how big this is going to be. It's going to depend a lot on how successful our customer is here.

Okay. And then you mentioned you have a show in September to introduce some products. Approximately how soon after the show will you start taking orders on these products?.

Usually, we're going to get exposure. I mean, we'll be ready to start taking orders. We'll have a better sense for that probably at the next quarterly call after we've introduced to see, you know, how quickly customers are ready to move on things. But until we actually introduce it, it's not something we know up front, George. But I think we can provide more color in terms of what we see as the roadmap.

Okay. Go ahead, John. How long would it take to be able to produce the actual machine?.

in production, to ship? Yes, so right now, this is similar to the platforms we're producing with typical lead times of six to eight weeks. Suspect will be on the high end, maybe a little bit north of that, but I don't think it'll be – I think with a little bit of time, it should fall within our normal lead time range. But it may take six, nine months before the cycle times get to that point.

Okay. And then how's the progress going on the chemical business?.

Are you new customer wins? We've had some wins. Yes, I mean, yes, we've talked about some of those. We have a pipeline. But it's, you know, we're still, it takes time, right? So we've built the pipeline. We've got a lot of energy right now going towards replicating some of those successes with other customers. Yes. So we're expecting to see some incremental improvement in the coming quarters from those efforts. But it's, you know, it's, again, we've focused really on getting a some momentum behind that pipeline right now. Okay. Thanks, Bob.

All right, thanks, George. This concludes today's question and answer session. I would now like to turn the conference back over to management for any closing remarks.

Well, thank you, operator. In closing, I want to thank everybody for joining our earnings call today. We look forward to seeing some of you later this month at the Canaccord Genuity Conference in Boston. And thanks again for your continued support of Amtech Systems. Have a good evening.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Good day, and thank you for standing by, everyone, and welcome to the Amtech Systems Fiscal 2026 Second Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Jordan Darrow of Darrow Associates, Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. We appreciate you joining us for the Amtech Systems Fiscal 2026 Second Quarter Conference Call and Webcast. With me today on the call are Bob Daigle, Chairman and Chief Executive Officer; and Mark Weaver, Interim Chief Financial Officer. After close of market today, Amtech released its financial results for the second quarter of 2026. 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 cover this call and the webcast. Some of the comments we 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 on the Investors section of our corporate website.

The company assumes no obligation to update any such forward-looking statements. You are cautioned to not 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 could cause actual results to differ materially from those in forward-looking statements are changes in technology 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; and the effect of overall market conditions, including equity and credit markets and market acceptance risks; ongoing logistics, supply chain and labor matters 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 referencing non-GAAP financial measures as we discuss the financial results for the first quarter. You will find a reconciliation of those non-GAAP measures in our actual GAAP results included in the press release issued today.

I will now turn the call over to Amtech's Chief Executive Officer, Bob Daigle.

Thank you, Jordan. Revenue for the quarter was $20.5 million, which was up over 30% from the same quarter last year and up 8% sequentially. Our adjusted EBITDA was $2.5 million or about 12% of sales, an increase of $1.1 million from the prior quarter and $3.9 million from a year ago. While reported revenues were at the high end of our guidance range, our adjusted EBITDA margin was a significant beat, as we had guided to high single-digit EBITDA margins.

Higher gross margins contributed to our improved profitability and cash generation. Gross margin approached 48% in the second quarter, up from 45% in the first quarter. Cash on hand at the end of the quarter was $24.4 million, an increase of $2.3 million from the prior quarter and $11 million from a year ago.

AI-related sales accounted for over 30% of our Thermal Processing Solutions segment revenue in the second quarter and bookings were very strong. Momentum for AI-related demand continued to build in the second quarter. Advanced packaging has emerged as a critical bridge between silicon innovation and the escalating demands of artificial intelligence infrastructure.

As traditional Moore's Law scaling slows, the ability to pack more computing power into a single footprint now relies less on shrinking individual transistors and more on how those chips are interconnected. By enabling high-bandwidth memory integration, reducing data latency through 2.5D and 3D stacking and allowing for massive system-on-package architectures, advanced packaging provides the physical foundation necessary for generative AI and large language models to thrive.

In short, packaging is no longer just a protective housing for chips, it is a primary driver of the performance, power efficiency and scale required to fuel the next generation of AI processors. Capital equipment, which can deliver high yields and throughput is vital to support this AI revolution.

As broadly reported, semiconductor OEMs and OSATs continue to increase investments to expand capacity to support the massive AI infrastructure build-outs. Demand has been very strong for our advanced packaging equipment and AI server board assembly equipment due to our differentiated capabilities that include TrueFlat technology and market-leading temperature uniformity, which enables high yields when producing these very complex and expensive products.

Although we have limited visibility due to our short lead times, our channel checks support our belief that demand will remain very strong for the foreseeable future. Based on bookings and quoting activity, we expect the percentage of revenue from AI applications in our Thermal Processing Solutions segment to exceed 40% in the third quarter.

We are also seeing increased quoting activity and bookings for panel-level packaging. These more demanding packaging technologies are serving more mainstream semiconductor applications, but their process requirements align very well with our differentiated capabilities. To accelerate growth, we're continuing to invest in next-generation equipment to support higher density packaging to address emerging customer requirements.

We plan to launch the first product for higher-density packaging at the SEMICON trade show in Taiwan in early September. We believe the capabilities provided by our next-generation equipment will significantly increase our addressable market and help drive growth beyond 2026. Growth of our Thermal Processing Solutions parts and service business was also a highlight in the quarter. Customer outreach initiatives have helped drive growth with revenue up 10% sequentially and 56% year-over-year.

I should note that while we are benefiting from demand for our products to support the AI build-out, we are also beginning to use AI software integrated with our ERP and CRM sales tools to help support customers and streamline our sales process. For our Semiconductor Fabrication Solutions segment, we continue to leverage our foundry service and technical capabilities to pursue applications from customers not well supported in the industry.

We have built a strong opportunity pipeline and are expanding efforts to replicate successes and grow sales of legacy products. Overall, our IDI chemicals business revenue was up 15% year-over-year. We have also made significant improvements in the service levels we provide and have driven outreach initiatives to grow our parts and services business at Entrepix.

Revenue for parts and service at Entrepix was up about 40% year-over-year. I'm very encouraged by the early results from our customer-centric growth initiatives. Unfortunately, much of the success from these initiatives in our Semi Fab Solutions segment has been masked by weak sales of our PR Hoffman products due to weakness in demand from our major silicon carbide customers.

As I've stated before, 2026 will be an investment year for our SFS business as we execute on our strategy to overserve the underserved, but we believe that our customer-centric growth initiatives will deliver reoccurring revenue streams with meaningful profits beyond 2026.

The operating leverage and working capital efficiency across the company resulting from our product line rationalization efforts and a migration to a semi-fabless manufacturing model over the past 2 years helped deliver improved results for the quarter and should result in continued strong cash flow and further increases in gross margins and EBITDA margins as revenues increase.

Our semi-fabless model, which includes -- concluded the consolidation of our manufacturing footprint from 7 facilities to 4 should also allow us to significantly increase revenue with minimal capital expenditures. We ended the quarter producing 9 reflow systems per week and have the capacity and supply chains to accommodate the growth we expect with little or no CapEx.

In summary, growth opportunities driven by AI infrastructure investments and our customer-centric set strategy, combined with strong operating leverage that results from our asset-light semi-fabless business model position us very well to deliver meaningful shareholder value.

Before I hand the call over to Mark, I have 2 organization announcements to share. First, as we announced last week, Tom Sabol has been appointed as CFO and will be joining Amtech on May 14. Tom brings more than 20 years of CFO experience across publicly traded and private equity-backed organizations with deep expertise in developing and leading finance teams, driving financial performance, Investor Relations and SEC reporting.

His background spans several industries, including financial services, software and advanced manufacturing. I look forward to working closely with Tom, as we continue to drive growth and profitability.

I would like to take a moment to recognize and thank Mark Weaver for stepping in as interim CFO. Mark came out of retirement to help us with this transition, and I greatly appreciate his support and his leadership. I am also pleased to announce that Guy Shechter will be joining Amtech on May 19 in a newly created President and Chief Operating Officer role.

Guy has held various commercial and general management positions with semiconductor equipment and advanced packaging equipment companies. The extensive experience, customer relationships and leadership skills that he brings to Amtech will be critical as we expand our portfolio of solutions for AI applications to accelerate growth.

I'm looking forward to having Guy join the Amtech team. Now I'll turn the call over to Mark for more details concerning our Q2 results.

Thank you, Bob. Once again, it's been a pleasure working with you and the folks at Amtech. I've truly enjoyed my time here. Now I'll review the financials for the fiscal '26 second quarter. Following the 2-year-plus transformation led by Bob, the company is finally at a place where year-over-year revenue comparisons are meaningful.

The one consistent characteristic of our revenue comparisons over the past few years has been the positive impact of AI product demand within the TPS segment. In the second quarter of 2026, AI revenues accounted for more than 30% of TPS segment revenue. Bookings for AI applications remain strong, and we are experiencing both book and ship in the same quarter as well as book now and ship later on.

This has led to the second consecutive quarter of company-wide bookings exceeding sales for the period. Other areas of TPS and SFS sales are also contributing growth on a consolidated basis, which is being partially offset by weakness in select product lines, as Bob discussed in his remarks.

Total SFS revenues were $5.7 million in the second quarter, up 15% from approximately $5 million in both the first quarter of 2026 and the second quarter of 2025. Moving on to gross margins. The company's product line rationalization and our focus on growing higher-margin product lines, including AI advanced packaging solutions as well as our recurring parts services business are delivering their intended results, particularly as we are benefiting from greater scale.

Gross margin as a percentage of sales increased to 47.7% in the second quarter of 2026, up nearly 300 basis points from 44.8% in the first quarter of '26. Comparison to the prior year period is not meaningful since that quarter included a $6 million noncash inventory write-down as part of our broader turnaround and transition, which took margins into negative territory in the second quarter of 2025.

Selling, general and administrative expenses increased $0.3 million sequentially from the prior quarter and were relatively flat as compared to the second quarter of 2025. The increase is primarily due to expanding business activities, tax and IT consulting fees. Research, development and engineering expenses were relatively flat compared to prior periods.

The company continues to invest with a measured yet opportunistic approach to R&D, including next-generation products targeting the AI supply chain and our specialty chemicals business. GAAP net income for the second quarter of fiscal 2026 was $1.2 million or $0.08 per share. This compares to GAAP net income of $0.1 million or $0.01 per share for the preceding quarter and a GAAP net loss of $31.8 million or $2.23 per share for the second quarter of fiscal '25.

During the second quarter of 2025, the company recorded significant noncash inventory write-downs and impairment charges, which make the year-over-year comparisons for profitability not really meaningful. The company's second quarter of '26 GAAP net income includes $0.3 million of foreign currency exchange losses versus $0.2 million in the prior quarter, primarily driven by a weakening United States dollar against the Chinese renminbi.

Unrestricted cash and cash equivalents at March 31, 2026, were $24.4 million compared to $22.1 million at December 31 and $17.9 million at September 30 and $13.4 million a year ago. The increased cash balances are due primarily to the company's focus on operational cash generation, working capital optimization, strong accounts receivable collections and accounts payable management. The increase in cash from the first quarter of this year is even more meaningful since we are carrying an additional $0.9 million in inventory to accommodate higher order flow.

The company continues to have no debt. As for the $5 million stock repurchase program, the company did not use any cash for this, as no shares were repurchased since the plan was put in place on December 9.

Now turning to our outlook. For the third fiscal quarter ending June 30, 2026, the company expects revenue in the range of $20.5 million to $22.5 million. At the midpoint of this range, our guidance is meaningful year-over-year and sequential quarter increase.

AI-related equipment sales for the Thermal Processing Solutions segment is anticipated to drive the majority of our revenue growth and account for as much as 40% of the segment's sales in the third quarter of 2026.

With the benefit of continued top line growth and the sustainable improvements in structural and operational cost reductions, Amtech expects to benefit from its operating leverage to deliver adjusted EBITDA margins in the low double digits range.

The outlook provided during our call today and in our earnings press release is based on an assumed exchange rate between the United States dollar and foreign currencies. Changes in the value of foreign currencies in relation to the United States dollar could cause the actual results to differ from expectations.

And now I will turn the call over to the operator for questions.

[Operator Instructions] And today's first question comes from Scott Buck with Titan Partners.

Bob, I was hoping to get a little more granularity on gross margins in SFS. It looks like it was up about 800 basis points sequentially. So any kind of added color on what's going on there would be great.

Yes. Again, I think a lot of -- revenue contributed -- the additional revenue contributed a bit to that. And I think the balance would really be mix related. There wasn't anything really structurally different quarter-to-quarter in that segment, more reflective of the mix of products through that business and then the incremental revenue.

We have a lot of operating leverage. As you might imagine, with the -- basically the structural changes we've made over the past couple of years, we've positioned ourselves where we do get very solid flow-through of any incremental revenue to our overall results.

Great. That's very helpful. And then I want to ask about kind of geographic mix and how you're seeing demand trends across regions.

Yes. So as you might imagine, Asia is really the hotbed for AI infrastructure build-outs. Traditionally, in the packaging area, it's been almost exclusively Taiwan, but what we're seeing is a significant build-out of packaging infrastructure in other parts of Southeast Asia, Thailand, Malaysia, Indonesia, India, for example. So we're seeing a broadening of geographic footprint in terms of major investments in the packaging area for almost all driven by AI infrastructure.

And I'd say more recently, we're seeing quite a bit more activity, I'd say, in North America as well. It was pretty quiet, but we're starting to see some investments being made. I'd say more so on the enterprise level board assembly at this stage than chip packaging, but it's nice to see some increased AI activity in North America as well.

That's helpful. In terms of Asia, should we be keeping an eye out on any kind of trade policy, tariff or supply chain dynamics?

Yes. Specific to the tariffs, we positioned ourselves pretty well there where if you go back a year ago, any equipment coming into the U.S. was basically being manufactured in China. And obviously, there were very meaningful tariff impacts as a result of that. But we did establish a partner where we now manufacture equipment for the U.S. in Singapore, Malaysia area. So we've kind of insulated ourselves quite a bit from the U.S.-China stress levels.

And beyond that, there really haven't been a lot of, I'd say, across Asia issues. I'd say back to your supply chain question, everyone is talking about memory being more expensive. And obviously, that's same for us, and we have to adjust our cost and pricing accordingly if memory becomes more expensive. We really haven't seen any shortages, however, I would say it's more -- there's a little bit of price pressure that we need to deal with and pass along on the memory side.

Okay. Great. And then last one for me. Cash continues to improve. How should we be thinking about capital allocation? Or I should say, how are you thinking about capital allocation? You have the $5 million repurchase authorization out there. Is that a priority? Or is it more R&D investment in new products or even potentially M&A?

Yes, let's -- Yes, I'd say growth is number one, right? Because back to the operating leverage discussion, as we grow with the strong margin leverage we have in our portfolio, and I should mention with all the product lines that we cut from the portfolio rationalization efforts, I would say really across the board, we have very healthy margins across the entire portfolio right now.

So any of the product lines that grow are very meaningful in terms of improving cash generation, gross margins and EBITDA. I'd say from an investment standpoint, we are making those investments. We've been increasing -- we have our R&D efforts around next-generation equipment. There could be a little bit of incremental investment needed to drive that home.

We're investing in resources to develop the pipeline for SFS in terms of trying to build out our IDI portfolio and the recurring revenue streams. We'll continue to incrementally invest in that. I don't see that having a meaningful impact on cash needs. And then the other factor I think we want to point out is with our semi-fabless model, we have the ability to scale without meaningful CapEx.

As I mentioned in my comments, with -- even looking out a year in terms of high growth and demand for the equipment used for AI packaging, we don't really see the need for deploying meaningful cash for CapEx. Our semi-fabless model and our supply chain can handle that growth. So having said all that, long story short is if we find -- we're active, if we could find inorganic opportunities, we would deploy cash accordingly.

But as I've said to many people, I spent over a decade doing corporate development in a prior life. And I would say we need to be prudent, cautious and make sure that what we do is generating real meaningful value.

So we're going to be -- when people ask me, are you going to acquire? I always answer the question with maybe because if we find acquisitions that can create real value, we're going to do those to accelerate growth. But we do have a great pipeline of organic growth that I think can push us forward. And then back to your question about capital allocation, obviously, first priority is growth. If we don't have -- if we didn't have better uses for that, then, of course, we would look at providing the cash back to shareholders in some form.

[Operator Instructions] And the next question comes from George Marema with Pareto Partners.

I just want to give you kudos for the tremendous transformation over the last 2 years and with the business and now you're starting to see the fruits of that operating leverage, it's fantastic to see this. So thanks for that. First question I have is on the change we've seen recently with being very GPU dominated to now a lot more of the CPU and CPUs being more advanced packaging requirements demand. I wonder if you can kind of size up and differentiate what this means to Amtech in terms of opportunities and velocity of capacity adds going forward?

Yes. My sense, George, is I would -- it's a very favorable tailwind for us in that if you think about our business and in terms of how we package semiconductor packaging or enterprise board assembly for that matter, a lot of it has to do with units and size of those units, right? And I think as many on the call may be aware, you start -- even going back to the -- you look at the Blackwell versus Rubin GPUs where the size of the packages are getting much, much larger is very beneficial.

Because what we do is we -- you can kind of think about what we're providing is very much based on area of production. So it's the size of the packages, and it's a number of packages. So when you hear people talk about the number of CPUs, maybe I've heard numbers as much as, what, 10:1 against GPUs, TPUs to do a lot of the localized processing for AI.

I think that bodes very well for volume production in the industry, which typically bodes very well for us. So we think it's a tailwind. It's too early to -- we're going to try to get our arms around what this could mean in terms of additional acceleration. But I think it's very positive. It's hard to put my arms around the numbers at this stage.

Okay. I was curious on the silicon carbide side of the business, with the increasing demand drivers of lots more automotive AI content, power, higher voltages, thermal performance requirements, et cetera, do you see any demand outlook increasing on these areas in the next year or so?

Yes. Possibly, but I do have -- I temper -- when I look at the big driver for silicon carbide was really the EVs, the electric vehicles. And a lot of that growth is really being driven primarily in Mainland China today, which is less of an opportunity for us than in the West. I do think the AI infrastructure will drive some demand increase.

It's hard to -- I think we're quite a ways away from that impacting capital equipment needs because a lot of the Entrepix volume, if you go back 2, 3 years ago, was capital equipment as they were ramping up infrastructure for EV. I don't think there's enough demand there yet to drive any of that.

And I do think the cost pressures on the silicon carbide side in the West and the tremendous capacity that's put into China that's competitive, it could come back. I just wouldn't put -- I'm not emphasizing that, frankly, George, as a major growth driver for us. It could be helpful, but I do think eye on the ball over here is really maximizing our opportunities around packaging and assembly and AI, and it's building out that specialty chemicals annuity business that if you want to -- in terms of where our best investments can be made to drive value.

Speaking of chemicals, on your chemical side of the business, are you doing much R&D in the -- for addressing all the polymers, adhesives, et cetera, for advanced packaging, semiconductor for like -- that addresses melting and warping and cooling and signal loss, all that sort of stuff?

We're mostly cleaners, lubricants. We do have some coolants, however, in the processing of primary wafers, more so at the wafer level, though, than -- or optics. I would say optics is an area we're paying more attention to, as you might imagine, than the chemicals and the packaging area. But I do see opportunities -- significant opportunities, frankly, in optics or optical-related semiconductor production, and we're pursuing those.

Do your cooling chemicals and equipment, do they kind of help address these warpage yield problems that are emerging at the leading edge now?

Not so much. I think no, but I wouldn't say they do. I think the warpage where we benefit is on the packaging, which is our TrueFlat technology. That's really where we shine, George. If you've got a $30,000 processor that you're trying to assemble, you need to keep it flat. And I would say that's where we really do well with our TrueFlat equipment.

And the next question comes from Craig Irwin with ROTH Capital Partners.

Last quarter, the small delay in one of your AI customers in taking some packaging equipment had a big impact on your stock. Did we maybe see the delivery of that equipment in this current period, or is it expected over the next couple of months? And do you expect the linearity or the overall business to have sort of a smoother trajectory given the size and the scale that you're gathering over the next couple of quarters?

Yes. We did ship that particular equipment during the quarter. And I'd say that the visibility, I wouldn't say it's great, but it is getting better because there's a lot more activity in terms of new facilities being put in.

And so we are seeing more bookings with deliveries out a quarter and in a couple of cases, actually a couple of quarters now, which is very unusual for our business because, as I mentioned before, we have very short lead times. We've got a very efficient supply chain, turn equipment around very quickly. So we've typically been a book and ship even in this large-scale capital equipment space.

But having said that, because people are actually building new facilities now and don't necessarily need all the equipment immediately, we're seeing better visibility, which I think will translate back to -- I think a good point is that it should start to smooth things out a bit, frankly, as we get better visibility and bookings that aren't just current quarter, but out of ways.

That definitely makes sense. The next question is one that I get asked fairly often, right? It's more of a big picture question, Bob. So can you talk a little bit about Amtech's moat in advanced packaging and AI? What's allowed you to dominate this space? There are others that would like to do business in here, but you've maintained a really strong reputation on technology. It's allowed you to have those long-term customer relationships and supplier relationships, too. What's different about what you're doing that gives you this moat?

Yes, because, generally, we win when it's a demanding application, and there's actually 3 components that usually come into play. I'd say in advanced packaging, that TrueFlat technology, and it's -- unfortunately, we don't have graphics in front of you, but these are large conveyorized piece of equipment, let's say, almost half the length of a tractor trailer bed that are doing the reflow operations for these packages and you're raising things at very high temperatures.

Most materials, most substrates, and I think George earlier was alluding to this tend to bow and twist and deform as you're heating them up. And we have technology which allows us to -- it actually pulls a vacuum, it holds the substrates down flat against the belt. So things don't basically shift during the assembly process. And what does that mean? That means high yield. So in applications where you're trying to process something that's very expensive, you need -- you're not going to sacrifice yield, you've got to have equipment that's going to be robust.

The other thing I'd say is temperature uniformity. I think we have a significant advantage in terms of being able to provide uniformity across our refloat, across the belt within zones. Our latest equipment actually has reconfigurable zones that can be customized by customers, so we've provided capabilities that really are enabling for high yield, high throughput processing of these things.

And I'd say the last thing, which I think I've mentioned before, like our Aqua Scrub technology, for example, where we can remove the contaminants from the processing fluxes out of the gas stream so that it reduces downtime in the ovens and reduces the risk of contaminating the product. So we've got a bunch -- I mean, it's not just one -- I guess that's the tough part, Craig. It's not one thing. We've got a portfolio of capabilities and IP around some of these capabilities that put us in a position where if you're trying to do -- you're trying to process an AI package, an AI enterprise board, it's expensive, we're worth it. I guess I'd say, which is why we've captured the strong position, market position that we have today and enjoy today.

And this concludes today's question-and-answer session. I would now like to turn the conference back over to management for any closing remarks.

All right. Thank you, operator. In closing, I want to thank everybody for joining our earnings call today. We look forward to seeing some of you later this month at the B. Riley Annual Investor Conference and then in June at the Planet Microcap Conference. We hope you can join us at either of these events. And thanks again for your continued support of Amtech Systems, and have a good evening.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.

Good day, everyone, and welcome to the Amtech Systems Fiscal First Quarter 2026 Earnings Call. Please note that this call is being recorded and simultaneously webcast. I would now like to turn the call over to Jordan Darrow of Darrow Associates, Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. We appreciate you joining us for the Amtech Systems Fiscal 2026 First Quarter Conference Call and Webcast. With me today on the call are Bob Daigle, Chairman and Chief Executive Officer; and Mark Weaver, Interim Chief Financial Officer. After close of market today, Amtech released its financial results for the first quarter of 2026. 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 cover 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 in 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 could cause actual results to differ materially from those in forward-looking statements are changes in 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; and the effect of overall market conditions, including equity and credit markets and market acceptance risks; ongoing logistics, supply chain and labor matters 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 referencing non-GAAP financial measures as we discuss the financial results for the first quarter. You will find a reconciliation of those non-GAAP measures to our actual GAAP results included in the press release issued today.

I will now turn the call over to Amtech's Chief Executive Officer, Bob Daigle.

Thank you, Jordan, and welcome to everyone joining our call today. Before I provide commentary on the quarter and recent developments, I'd like to introduce Mark Weaver, our Interim CFO.

Mark joined us on December 16 to help us with our CFO transition until we appoint a permanent CFO. While we are making progress in our search, I'm confident we are in terrific hands with Mark. I had the privilege of having him as a colleague when he served as the Chief Accounting Officer and Corporate Controller of Rogers Corporation.

Among other senior financial roles, he was the Chief Accounting Officer of NXP Semiconductors. We're very pleased to have someone with his experience assist us during this transition.

Now on to my review of the quarter. Revenue for the quarter was $19 million at the midpoint of our guidance. And our adjusted EBITDA was $1.4 million, also within our guidance range. The quarter benefited from strength in demand for AI-related products, which accounted for 35% of revenue for our Thermal Processing Solutions segment in the first quarter, up from about 30% in the fourth quarter.

Another highlight is that our bookings were strong for the quarter. Our overall book-to-bill ratio was 1.1, driven by performance of our Thermal Processing Solutions segment due to strength in AI equipment orders. We have the ability to deliver the majority of this equipment in the second quarter due to our short lead times, but customers have requested some deliveries in the third quarter to align with their factory build-outs.

As broadly reported, semiconductor OEMs and OSATs continue to increase investments to expand capacity to support strong AI infrastructure demand. We expect demand for the equipment we produce for AI applications to continue to increase in the third and fourth quarters.

In addition to traditional advanced packaging bookings, I'm pleased to report that we received initial orders from multiple industry leaders for panel-level packaging equipment during the quarter. Panel-level packaging is an emerging technology that provides cost and throughput advantages that should drive broader adoption and is expected to lead to future growth.

We're also continuing to invest in next-generation equipment for high-density packaging to support emerging customer requirements. We believe this next-generation equipment will provide the opportunity to significantly increase our addressable market beyond 2026. We are currently processing samples for multiple customers.

For our Semiconductor Fabrication Solutions segment, I'm pleased to report our first win for a specialty chemical product that we developed for a medical device semiconductor application. We produced and delivered initial product in the first quarter. Strong customer engagement and a robust opportunity pipeline for our specialty chemicals is validating our strategy to overserved, underserved customers with technically demanding high-value applications.

We also had improved bookings for our Entrepix and BTU parts and services businesses during the quarter as a result of a more proactive approach to business development and improvements we've made in service levels. Unfortunately, weak demand for our PR Hoffman products negatively impacted overall SFS results for the quarter and offset bookings gains at Entrepix.

Demand at PR Hoffman continues to be impacted by weakness in the mature node semiconductor market and severe cost pressures at major silicon carbide semiconductor customers.

2026 will be an investment year at SFS as we execute on our strategy to overserve the underserved, but we expect double-digit growth and meaningful profits from these sticky reoccurring revenue streams beyond 2026.

We believe the strong operating leverage and working capital efficiency that has resulted from our product line rationalization efforts and a migration to a semi-fabless manufacturing model over the past 2 years will result in continued strong cash flow and further increases in gross margins as revenues increase.

This was our ninth consecutive quarter of positive operating cash flow. Cash generated from operations was $4.1 million for the first quarter, and we ended the quarter with a cash balance of $22.1 million without debt. Adoption of a semi-fabless model, which included the consolidation of our manufacturing footprint from 7 facilities to 4, should also allow us to significantly increase revenue with minimal capital expenditures. We expect capital expenditures for the year to be below $1 million.

In summary, growth opportunities driven by AI infrastructure investments and our differentiated capabilities, combined with strong operating leverage as a result of our asset-light semi-fabless business model; position us very well to deliver meaningful shareholder value.

Now for further details on our financial results, I'll pass the call to Mark.

Great. Thank you, Bob. It really is a pleasure to be working with you again, even if it's for a short period of time. Now on to my review of the financials for the fiscal '26 first quarter.

For proper perspective, net revenues of $19 million in the first quarter of '26 do not represent a meaningful comparison to the prior-year period. This is due to the company's product line rationalization that began 2 years ago. For these periods, the only perspective worth noting is for AI-related demand, which grew year-over-year.

You'll see in a moment the benefits of this rationalization to date when I address AI revenues as part of our TPS segment and when I talk about our consolidated gross margin as a percentage of revenues and other improvements in the company's operating performance, cash flow generation and balance sheet.

But back to the discussion on revenues. A more appropriate comparison is to the fourth quarter. Total revenues were positively influenced by growth in AI product demand within the TPS segment. AI revenues contributed approximately 35% of TPS revenue versus 30% in Q4. The increase was approximately 10% on a sequential basis.

Bookings for AI applications remain strong. Other areas of TPS and SFS sales offset this growth on a consolidated basis, which is attributable to general weakness in non-AI areas of the semiconductor industry, in particular, for mature node semiconductors used in the automotive electronics industry.

Circling back to the benefits of the company's transformation, gross margin as a percentage of sales increased in the first quarter of '26 sequentially from the fourth quarter and year-over-year from the first quarter of last year. Importantly, the increase in gross margin was achieved on lower sales volume. Gross margin as a percentage of sales increased to 44.8% in the first quarter of '26 from 38.4% in the same period of the prior year and 44.4% in the fourth quarter.

Selling, general and administrative expenses increased $500,000 sequentially from the prior quarter but decreased by $1.2 million as compared to the first quarter of '25. The increase from the prior quarter is primarily due to incentive compensation, professional fees and insurance; and the decrease from the prior year period is primarily due to cost reduction efforts and structural changes to reduce fixed costs.

Research, development and engineering expenses increased by $0.3 million sequentially from the prior quarter and were relatively flat compared to the same prior-year period. The company continues to maintain a more focused approach to its innovation investments, including next-generation products targeting the AI supply chain and our specialty chemicals business.

GAAP net income for the first quarter of fiscal 2026 was $0.1 million or $0.01 per share. This compares to GAAP net income of $1.1 million or $0.07 per share for the preceding quarter and GAAP net income of $0.3 million or $0.02 per share for the first quarter of fiscal 2025.

Unrestricted cash and cash equivalents at December 31, 2025 were $22.1 million compared to $17.9 million at September 30, 2025, due primarily to the company's focus on operational cash generation, working capital optimization, strong accounts receivable collections and accounts payable management. In the past 12 months through December 31, 2025, cash increased by 67% or $8.9 million, while the company has remained without debt.

As for the stock repurchase program, the company did not use any cash for this as no shares were repurchased since the plan was put in place on December 9.

Now turning to our outlook. For the second fiscal quarter ending March 31, 2026, the company expects revenue in the range of $19 million to $21 million. At the midpoint of this range, our guidance is a sequential increase from our reported revenue for the first quarter. AI-related equipment sales for the Thermal Processing Solutions segment is anticipated to drive the majority of our revenue growth.

With the benefit of previously implemented structural and operational cost reductions, Amtech expects to continue delivering solid operating leverage, resulting in adjusted EBITDA margins once again coming in at high single digits.

The outlook provided during our call today and in our earnings press release is based on an assumed exchange rate between the United States dollar and foreign currencies. Changes in the value of foreign currencies in relation to the United States dollar could cause actual results to differ from expectations.

And now I will turn the call over to the operator for questions.

[Operator Instructions] And our first question today comes from George Marema from Pareto Ventures.

So I was curious on this -- you discussed in the call about this panel-level business. Could you elaborate a little bit on what that is, a little more color on that?

Yes. The -- traditionally, chip packaging has been pretty discrete components. And the drive is really from a cost effectiveness and throughput perspective to start to produce packaging really in large panel formats and then basically dice them up later like they do with semiconductor wafers.

Our sense is this is really the future of advanced packaging. So it was important for us to really basically demonstrate that, again, we're in a position of process of record with the key OEMs and OSATs. So the variety of customer orders that we received for that technology in this quarter, I think, was good validation about future demand.

And during 2025, you were talking about perhaps in 2026 fiscal, you may have some new products. Does this have anything to do with [ fabs ] and new capabilities?

The new products are more around addressing higher-density packaging requirements, panel processing uses very similar technology to what we're providing today. So -- and again, what I mentioned earlier is we've built equipment, we're processing samples for customers for this higher-density packaging applications. But we're still -- we still haven't -- we're still in the relatively early stages.

At this stage, I'm thinking, George, that you're looking at probably 2027 before we would see any meaningful demand from that next-generation equipment.

Okay. And I was happy to hear you got a win in the specialty chemical business. Are there any other qualifications underway in the services and chemical businesses?

Yes. We have a variety of active engagements right now. And again, as I mentioned in the commentary, I've been very pleased with the level of customer engagement and pull for these collaborative development efforts. So I think we're starting to get a sense that this business model that we've developed around addressing these niche applications looks very promising, looks very promising in terms of developing a pipeline of this reoccurring revenue streams.

Our next question comes from Gary DiStefano from Titan Partners.

Bob, congrats on the very solid quarter. Listen, just a quick macro question level for me. Listen, given the growing backlog, customer orders, consistent operating cash flow, continued customer engagement; what are you most encouraged about here as you move through fiscal 2026?

Yes. I think the two areas that are strong bookings and as I -- the commentary, right, we have short -- we've talked about this before, short lead times on the equipment we provide for AI packaging. So we had a very solid booking quarter.

Some of it stretches into Q3. But at least based on our channel checks and what we're hearing from the -- out in the field, we're seeing we're seeing continued strong demand and what we're hearing is we should continue to see strength that goes into third quarter, fourth quarter as well because there's always been the question of how long is the demand going to continue. And we're getting continued evidence that we've got better visibility out to a few quarters now, which gives us some comfort.

As I mentioned, this being process of record for panel-level packaging also gives us some comfort in terms of driving future demand because we do think that's going to be a key part of where the industry is going.

And I'd say the third area, which George explored earlier is really the evidence that we're -- both the win with the customer, but also the strength of the pipeline we're seeing for our specialty chemicals, I think, puts us in a position where in terms of visibility towards growth and increasing confidence about growth, we're in a good place.

And again, the fact that we continue to see -- as we see this revenue flow through, the margin profile continues to strengthen, which is what we anticipated, but ultimately, we needed to see it in our results, and we are seeing it.

[Operator Instructions] Our next question comes from Craig Irwin from ROTH Capital Partners.

So Bob, I know you've worked so hard over the last several quarters to bring down your frictional costs, right, downsizing the footprint, adjusting your spending to your highest-priority projects and customers. This quarter, we saw a $700,000 increase quarter-over-quarter on the SG&A and R&D lines combined.

I know you're not going to be spending that much money unless you're very intentional about it. Can you maybe call out any items in there that you think are particularly interesting or projects or customers or general areas of commitment? Is this AI? Or is this something for the broader semiconductor industry? Anything you could share?

Yes. No, the R&D increases are really in two categories. We are investing and have increased investments in the next-generation packaging equipment for AI applications. So being able to handle higher density, we increased investments really to move more quickly. And I thought that was important for us. It's a huge opportunity for us that we need to capitalize on.

And again, I think the commentary around the semi fab solutions traction, now we've seen some validation. So we have increased resources a bit in that area and really trying to build that momentum behind growth in that business as well.

On the -- more of the G&A side thing, there were consulting costs, there's also some variable comp costs that were in the quarter that I think will be ongoing. I'm not so sure that the consulting costs, some of that could come down a bit as well in future quarters. But those were the main drivers for the differences quarter-over-quarter.

Understood. Then the next thing is business momentum, right? I know we're kind of in a choppy environment. You've been climbing a set of stairs as far as your AI revenue mix, 25-30, 35; that's awesome. Can you really -- do you have confidence that, that mix is likely to continue to increase over the next couple of quarters?

And I know that there's not a whole lot of order visibility per se, given the fast book and burn nature of a lot of your business. 1:1 book-to-bill is great. But do you feel like the sort of general tempo of that base business is healthy and potentially accelerating to where we can see different growth than what we've had over the last couple of quarters?

So let me start with the AI. I think our visibility has improved on the AI part of the business. Customers are more open around what they have planned for expansion these days because, obviously, with the rapid ramps, people are more concerned about making sure their supply chains, their supply base can support that.

So we're feeling pretty good around -- it's not great visibility. It's not like the orders are placed, but in terms of forecasts and what we're hearing in terms of the tempo and then the build-outs, right? Because I think if you characterize prior quarters, the equipment, for the most part, we were providing for AI chip packaging was, I'll call it, squeezing equipment into existing facilities, but you're now seeing new facilities being -- they're built and starting to be outfitted with equipment.

And that's part of when I commented on the strong book-to-bill in the first quarter, but some of these orders in the third quarter, that's tied to that, right? They're going to finish the facilities in the second quarter, do some of the installation work in the third quarter.

In terms of visibility on the balance of the semiconductor market, I read the same things and pay the attention probably to the same source as you do. There's some inklings of maybe some improvement in the more traditional mature node markets, but it's not -- the clarity is definitely not as good in that space as it is in AI. So I do expect the momentum to continue around AI. Those other parts of the business, we're less certain about, and that was reflected, frankly, in our guidance for the second quarter.

Understood. Last question, if I may. Sometimes GAAP earnings can be important, just given the different data services out there in the market. This quarter, you had an 83% tax rate. That doesn't strike me as a natural or normal tax rate for you.

Can you maybe talk us through what this was and what you think a fair tax rate could be for this year? I realize last year, actually, it was a tax benefit. So I wouldn't be surprised if we saw one again. But this kind of thing does sometimes create a little volatility in smaller names, yes.

Yes. Let me ask Mark to jump in here.

Yes. So Craig, this is because our U.S. entities are in a loss position. And so with them being in a loss position, there is no there's no tax benefit that's recognized as a result of them being in a loss position because we have a valuation allowance against our deferred tax assets.

So what you're seeing is the tax is coming through that's on our foreign entities. And although the foreign entities have income, right, that's probably twice as much as the loss in the U.S., but the -- that's the loss in the U.S. because that benefit doesn't come through because we have a valuation allowance, it ends up being that you're showing a lot -- a larger tax expense on the bottom line in relationship to the overall income because that income is reduced on a book basis because of the U.S. Does that help?

That makes complete sense to me. I've seen this many times in the past. And as we watch this U.S. super cycle play out, hopefully end up having to pay a lot of taxes at a low rate, but a lot of taxes in the future, right? Congratulations on the progress this quarter.

And with that, we'll be ending today's question-and-answer session. I would like to turn the floor back over to Bob Daigle for closing remarks.

All right. Well, thank you. And in closing, I want to thank everybody on the call today. We look forward to seeing some of you in March at the upcoming Annual ROTH Capital Conference as well as other Investor Relations activities. And for everyone else, please stay tuned for updates on our continued progress, and have a good evening.

Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.

Good day, and welcome to the Amtech Systems Fiscal Fourth Quarter 2025 Earnings Call. Please note that this call is being recorded and simultaneously webcast.

I would now like to turn the call over to Jordan Darrow of Darrow Associates Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. We appreciate you joining us for Amtech Systems' Fiscal Fourth Quarter 2025 Conference Call and Webcast. With me today on the call are Bob Daigle Daigle, Chairman and Chief Executive Officer; and Wade Jenke, Chief Financial Officer.

After close of market today, Amtech released its financial results for the fourth quarter of 2025. 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 without contain -- 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 in the Investors section of our corporate website. The company assumes no obligation to update any such forward-looking statements. You were 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 could cause actual results to differ materially from those in the forward-looking statements are changes in technologies used by customers and competitors; change in volatility and the demand for products; the effect of changing world while political and economic conditions, including trade sanctions, the effect of overall market conditions, including equity and credit markets and market acceptance risks; ongoing logistics supply chain and labor matters 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 referencing non-GAAP financial measures as we discuss the fiscal fourth quarter financial results. You will find a reconciliation of those non-GAAP measures to our actual GAAP results included in the press release issued today.

I will now turn the call over to Amtech's Chief Executive Officer, Bob Daigle.

Thank you, Jordan, and good afternoon, and thank you for joining us today. I'm pleased to report that our fourth quarter performance was above expectations with revenue of $19.8 million versus a guidance range of $17 million to $19 million. Strength in demand for equipment we produce for AI applications continues to be our primary growth driver. However, both our thermal processing solutions and our semiconductor fabrication solutions segments did exceed forecast, reflecting our strong position for Advanced Packaging solutions in -- markets and more stable demand within the mature node semiconductor market. Adjusted EBITDA also came in above expectations at $2.6 million or about 13% of revenue versus the mid-single-digit EBITDA expected.

These recent results are demonstrating our strong operating leverage and ability to generate cash. We ended the quarter with almost $18 million of cash on the balance sheet and continue to have no debt after paying it off last year. The cash swing over the past 2 fiscal years enabled us to eliminate our debt, which stood at over $10 million and increased our cash to current levels. Our stronger-than-expected results for the quarter reflect the combined contribution of improved operational discipline, the benefits of our transition to a more flexible semi-fabless manufacturing model and our focus on higher-margin products where we have competitive advantages. Expanding on our end markets. Within the Thermal Processing Solutions segment, advanced semiconductor packaging remained a highlight this quarter with continued strength driven primarily by ongoing investments in AI infrastructure.

For context, in the fourth quarter, revenue from equipment used for AI infrastructure accounted for over 30% of our thermal processing solutions revenue versus 25% in the prior quarter. Based on our channel checks, we see no slowdown for this area of our business. Related to revenue mix, we generated about 60% of our revenue from capital equipment and 40% from reoccurring revenues, including consumables, parts and services. The balance between capital equipment and reoccurring revenue is important and reflects our strategy to expand higher-margin reoccurring revenue streams while we fully capitalize on opportunities for equipment used to expand AI infrastructure.

As we look ahead, our fourth quarter bookings suggest we should continue to see strength for AI-related equipment revenue. They fully capitalize on this growth opportunity. We are continuing to invest in next-generation equipment that enables volume production of higher-density advanced packaging and electronic assemblies to increase our addressable market and the value we provide to customers.

Turning to our Semiconductor Fabrication Solutions segment. As we indicated last quarter, demand for front-end equipment and consumables tied to mature node semiconductor applications in industrial and automotive markets remained weak. That said, performance in the segment slightly exceeded our expectations in the quarter. Beyond the cyclical ebbs and flows of this market, we remain committed to controlling our own destiny by investing in applications and product development to solve problems faced by our customers. We expect these initiatives to deepen customer relationships and increase recurring revenue streams as customers qualify our products and scale production. While these initiatives will take time to scale, we are encouraged by the level of customer interest and engagement. This is all part of our strategy to overserve the underserved.

As a relatively small player in a very large overall market for semiconductor consumables and equipment, we are targeting high-end, high-margin applications where we can leverage strong technical capabilities and provide exceptional service. End markets include med tech and defense applications, among others, where we have strong customer engagement enabled by our foundry service and differentiated capabilities so we can develop sticky reoccurring revenue streams. Over the past 18 months, we've made tremendous progress optimizing our operating model and improving our cost structure. We implemented a series of cost reduction initiatives that included the elimination of some unprofitable products and a shift of some products to outsource partners to reduce labor and fixed overhead costs. These initiatives, which include consolidation of our manufacturing footprint from 7 sites to 4 sites resulted in $13 million of annualized savings.

Looking ahead, we expect to realize additional savings by subletting underutilized factories. These actions have significantly reduced our EBITDA breakeven point, improved our ability to scale profitably with higher volumes. With the majority of major optimization initiatives completed, we are now focused on growth initiatives to fully capitalize on AI equipment opportunities and increase our reoccurring revenue. Our improved financial performance prospects for continued operating cash flow generation, CapEx light business model, and a strong balance sheet have provided us with the flexibility to return capital to shareholders while also investing in growth opportunities. So Amtech's Board of Directors has authorized a share repurchase program of up to $5 million of the company's common stock for a 1-year period.

In summary, we have a strong foundation for growth driven by AI market opportunities and differentiated capabilities. The changes we've made to optimize our business model and streamline our product portfolio have created strong operating leverage, which positions us well to elevate profitability as we grow and create meaningful shareholder value.

With that, I'll turn it over to Wade for further details on our financial results.

Great. Thank you, Bob. Net revenues increased sequentially from the third quarter, driven primarily by strong demand in Asia for reflow ovens used in AI applications. The decrease in net revenues compared to the same period last year reflects higher AI-related revenues, offset by substantially lower mature node semiconductor revenues primarily for sales of wafer cleaning equipment and parts in our semi Application Solutions segment. In our Thermal Processing Solutions segment diffusion furnaces and high-temperature furnaces drove the decline in sales. GAAP gross margin decreased by $0.3 million sequentially from the prior quarter and decreased $1 million compared to the same prior year period. The decrease from the prior quarter was due to the onetime employee retention credit received in the third quarter of 2025.

The decrease in gross margin from the same prior year period is primarily due to lower sales volume in the mature node semiconductor market. Gross margin as a percentage of sales increased from 40.7% in the same prior year period, up to 44.4%, this current year quarter driven by cost save initiatives and product mix compared against the third quarter of 2025 and excluding the ERC onetime credit gross margin would have been 41.5% versus the current fourth quarter of 44.4% gross margin showing a nice sequential improvement. Selling, general and administrative expenses decreased $1 million sequentially from the prior quarter and decreased $2.4 million compared to the same prior year period. The decrease from the prior quarter and the same prior year period is primarily due to cost reduction efforts around overhead, expenses and cost structure changes to reduce our fixed costs.

Research, development and engineering expenses increased by $0.2 million sequentially from the prior quarter and decreased $0.4 million compared to the same prior year period. The increase from the prior quarter is primarily due to growth initiatives and the decrease compared to the same prior year period is primarily due to a more focused approach to our investments in innovation. GAAP net income for the fourth quarter of fiscal 2025 was $1.1 million or $0.07 per share. This compares to GAAP net income of $0.1 million or $0.01 per share for the proceeding shorter and GAAP net loss of $0.5 million or $0.04 per share for the fourth quarter of fiscal 2024. Non-GAAP net income for the fourth quarter of fiscal 2025 was $1.4 million or $0.10 per share. This compares to non-GAAP net income of $0.9 million or $0.06 per share for the preceding quarter and non-GAAP net loss of $7,000 or $0.00 per share for the fourth quarter of fiscal 2024.

Unrestricted cash and cash equivalents at September 30, 2025, were $17.9 million compared to $11.1 million at September 30, 2024, due primarily to the company's focus on operational cash generation, working capital optimization, strong accounts receivable collections from customers, accounts payable management and the employee retention credit.

Now turning to our outlook. For the first quarter fiscal ending December 31, 2025, the company expects revenue in the range of $18 million to $20 million. AI-related equipment sales for the Thermal Processing Solutions segment is anticipated to partially offset the transitions in our business related to mature node semiconductor product lines, with the benefit of previously implemented structural and operational cost reductions, Amtech expects to deliver solid operating leverage, resulting in adjusted EBITDA margins in the high single digits. Amtech remains focused on driving further efficiency gains and cost optimization across all operations, positioning the company to expand margins and generate more consistent profitability going forward.

Operations can be significantly impacted positively or negatively by the timing of orders, system shipments, logistical challenges and the financial results of semiconductor manufacturers. Additionally, although the company has been generating more revenues from recurring and consumable sales, the balance of the business is from semiconductor equipment industries, which can be cyclical and inherently impacted by changes in market demand and capacity utilization. The outlook provided during our call today and in our earnings press release is based on an assumed exchange rate between the United States dollar and foreign currencies, changes in the value of foreign currencies in relation to the United States dollar could cause actual results to differ from expectations.

As you may have seen in our 8-K filing, I have submitted my resignation as Chief Financial Officer, effective as of the close of business on December 29, 2025. My decision to step down is not a result of any dispute or disagreement with Amtech Systems. The decision is based upon my personal and family interest in mind. I'll be assuming an executive role at a different company, I have agreed to serve in a consulting capacity for a period of up to 6 months to assist with the closing of the first quarter of fiscal 2026, preparation and filing of the 2026 Annual Meeting proxy statement and the transition of my duties to a new CFO, Amtech Systems plans to launch a search for a new CFO immediately.

I want to take a moment to thank the Amtech Systems team who has achieved and improved substantially under my tenure. I also want to thank Bob Daigle for his tremendous vision and leadership as CEO. I've learned so much, and I will be eternally grateful for the opportunity.

Thank you. And I will now turn the call over to the operator for questions.

[Operator Instructions]

And the first question will come from Craig Irwin with ROTH Capital Partners.

Yes, I was on mute. I apologize for that. So Bob, can you maybe talk a little bit about your visibility with AI customers? I don't know if you can maybe just give us general color on backlog and backlog trends or orders, order indications? And maybe even just the direct investment you're seeing in the different facilities that you're selling into there as far as the customer commitments.

Yes. Yes. Let me walk through that, Craig. Yes. So again, broadly speaking, we're seeing very strong demand. I would characterize my sense right now is most of the equipment in the pipeline has been really being put into existing facilities. But what we're hearing is there are new facilities being built as well. So I think there's plans that go out there quite a while. In terms of our visibility and backlog, it's 1 of the -- and I think we've talked about this before. We have a very efficient, effective manufacturing organization for this back-end equipment. We look -- we can basically, for the most part, book and ship in the same quarter.

Our lead times will run 6 weeks or so for this equipment out of our Shanghai factory. So typically, we're getting orders in most cases, shipping within the same quarter. Having said that, there is an increased level of business where we're -- in some cases, they're telling us. We're still finishing up a factory, and it's going to be in, for example, the March quarter or in some cases, the June quarter before they want to take delivery. So I'd say we're getting a little bit more visibility out there because of other critical constraints and installing equipment. But for the most part, our volume has been driven by book and shift in current quarters.

Understood. Understood. You've explained the nature of the business in the past and it makes sense that it's not necessarily changing, just moving very well. So that makes sense. One area you guys have really impressed me over the last couple of years is on the execution, bringing down OpEx, right? The $13 million in savings. Can you maybe frame out for us what the sublet savings could be from the underutilized facilities. And I don't know if you can get more specific about which facilities and whether or not these are sales or things where you're already leased, but you can -- you're subleasing or if there's assets that can be sold.

Yes. No, these are leases of underutilized facilities and in both segments. I'd say combined, we're probably looking at once we sublet both facilities let's say, $700 million to $1 million in annualized savings associated with those.

Okay. Excellent. Excellent. Then to change subjects again, there's quite a lot of interest out there about new applications for silicon carbide. Some of these AI chip producers are apparently looking at different substrates for future generations of chips. I know you guys get involved very early on with different customer groups as far as development necessary for new processes, are you seeing some new customers maybe come in or new opportunities come in that might broaden your participation away from TPS into substrates for some of the AI momentum we're seeing in the market?

Yes. If it migrates to silicon carbide for processing, it would be more on the consumables side of things, Craig, that we would participate actually, I thought what you were going to reference is there's a lot of literature and discussion around the fact that the data centers themselves are going to likely distribute -- instead of having low voltage power across the facility, go to high voltage and step it down at the rack and that allows them to significantly reduce the amount of copper needed for busing across these AI data centers. So I'm hearing more about that, where basically it's another -- with EV pretty depressed right now across the industry.

It's a potential growth driver for silicon carbide where it's the power electronics for these data centers. I've heard a little bit about silicon carbide substrates. And again, I think for us, it would be more -- it could translate into consumables if that materializes.

Yes. I can clarify that for you. I'm sure you know, but you're probably limited as far as what you can say. So I'll say it publicly, I know that the silicon carbide produced by Wolfspeed is used by EPC power a private company based in California for the EPC power blocks so by Vertiv and those use 3.3 kV MOSFETs, which are much higher power than the MOSFETs -- and that is the primary product going in on the leading edge data centers today. So I do know that DC is adopting silicon carbide for power. What I was curious about and really where things could get insanely interesting is if it's a substrate for the actual for the AI chips themselves and not just the power.

Yes. And my sense would be that's a ways out. If that develops. It's -- I think I haven't heard anything imminent on that front, I guess, I would say, Craig?

The next question will come from Michael Legg with Ladenburg.

Bob, now that you've done a great job cleaning up the balance sheet and getting costs in line. And your comment on over serving the underserved. Can you talk a little bit about the opportunity in the service area?

Yes. So what we're focused on is really high-value niche opportunities or areas of the market where -- let me characterize it this way. If you're a large semiconductor application area, you tend to get pretty high service levels and product availability is always there and you get development support for new products, new applications. And what we're finding are opportunities, and they tend to be a little bit more niche-y in the medical area and the defense area, where for a large player, the volumes may not be all that meaningful. But for us, it creates a nice opportunity for this reoccurring revenue stream. So we're leveraging our foundry service where we do contract development. We do -- we can help qualify products with some of these OEMs basically to get our products into some of these applications as an alternative to some of the large incumbents.

And again, it's just going to take time to develop because it requires qualification, but it is very sticky business. It has a nice margin profile. And I think it helps develop some very strong connection with some key customers because we're there to support them where in many cases, others aren't.

Okay. Great. And then just a follow-up. On the CFO search, can you give us any update on your progress there?

Yes. So we -- it's -- we just started, and we'll keep everybody informed as things develop. But yes, we're still early in the search.

The next question will come from Mark Miller with the Benchmark Company.

Just wanted to clarify. You indicated that the spread between equipment and recurring revenues was 60-40. Was that for both the thermal processing in the semi fab sales? Or was it some differences there?

Yes. It's overall, I'd say the majority of the semi-fabrication solutions are the consumables parts service. And I probably have the TPS segment, I'll give you a rough number, let's say, 80% equipment, 20% on the recurring side.

In terms of your backlog, you said you've been focusing on higher-margin products. What does it look like in terms of the margin profile of your existing backlog? Is it better than what you've been reporting recently?

Yes, yes, we basically cleaned that up for the most part, Mark, if you -- when we talked a year or 1.5 years ago, we had a lot of things in our backlog had -- I would characterize as substandard margins and pretty much moved beyond that now. So what's sitting there of high quality for the majority of it.

You indicated that auto remains soft for you, but I was a little surprised by that because it's my understanding, at least for EVs, that auto sales in China are or better this year than last year?

Yes. I think, yes, most of our exposure in the auto industry is with the Western OEMs. So let's say, U.S. European players, less so in Mainland China. So my comments, frankly, referred to the semiconductor industry that serves the Western world.

The next question will come from George Marema with Pareto Ventures.

A couple of questions. Do you guys expect any effect from the ramp-up of Blackwell versus hopper? And also kind of the ramp-up of these custom ASICs like TPUs, et cetera?

From our perspective, they're basically using our understanding very similar processes and equipment capabilities. So I think -- to the extent they ramp and it's more volume that's beneficial. But in terms of significant technology differences at this stage, I wouldn't say there isn't much impact on us if the mix shifts.

Okay. And then as you look out to '26 in terms of your focused R&D on innovative investments and new products, any update on any new products for '26 and new initiatives?

Yes. So let's talk about the initiatives. And again, there's really 2 areas of focus for our investments on the thermal process solutions side of things, it really is around enabling continuous processing for higher density, higher -- tighter pitch devices where we think it could potentially open opportunities to participate in more of the processes that are used for these GPUs, TPUs and frankly, even the electronic assembly of dense boards for the AI data servers. So I think that's our emphasis for TPS is really around how do we participate in more of the process.

And by the way, that equipment has a high level of complexity and the requirements are more stringent. So we think the ASP would also be meaningfully higher. Then on the SFS side of things, our investment is really on driving our growth in our consumables, particularly -- specifically our chemicals business where we have some very strong capabilities on the application development that leverage basically leveraging our foundry. We have very strong technology folks in our R&D labs, our formulators. So -- and we think there's -- based on the engagement level, we think there are customers that can significantly benefit from our capabilities and support.

So that's where we're investing. Very much line of sight though. I said this before, we're a small company. We work on -- these aren't grand initiatives, if we build it, they will come kind of things that we're working on things that are very much involved customer engagement so that -- the goal here is to convert R&D efforts into meaningful revenue as quickly as possible.

Okay. And then 1 last one. Has there been any change in the competitive landscape in thermal area?

Nothing that I'm aware is visible to George. I think it's pretty much a very similar situation in that space.

Ladies and gentlemen, at this time, we've reached the end of the question-and-answer session. I'd like to turn the floor back over to management for any closing remarks.

All right. Well, first of all, in closing, I'd like to thank Wade for a service to Amtech over the past 16 months and his assistance as we transition the responsibilities to our back-office processes and systems have greatly improved as a result of Wade's efforts, and I wish him the best in his role in his new company.

And in closing, I also want to thank everybody on the call today or those who will participate in the recast for their interest in Amtech and for joining our conference call today. And we look forward to updating you on our progress in the months to come. Have a good evening, everyone.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.