AMTECH SYSTEMS INC

Results of Operations

The following table sets forth certain operational data as a percentage of net revenue for the periods indicated:

Net Revenue

Net revenue consists of revenue recognized upon shipment or delivery of equipment. Spare parts sales are recognized upon shipment and service revenue is recognized upon completion of the service activity, which is generally ratable over the term of the service contract. Since the majority of our revenue is generated from large system sales, revenue, gross profit and operating income can be significantly impacted by the timing of system shipments.

Our net revenue by reportable segment was as follows, dollars in thousands:

Total net revenue for the three months ended March 31, 2025 and 2024 was $15.6 million and $25.4 million, respectively, a decrease of approximately $9.9 million or 39%. Total net revenue for the six months ended March 31,

2025 and 2024 was $40.0 million and $50.4 million, respectively, a decrease of approximately $10.4 million or 21%. Our Thermal Processing Solutions results for the second quarter and for the first six months of fiscal 2025 decreased primarily due to lower sales of diffusion and high temperature furnaces from the prolonged weakness in the mature node semiconductor market and a shipping delay of a $4.9 million order resulting from a customer dispute regarding a previously cancelled order. Our Semiconductor Fabrication Solutions results for the second quarter and for the first six months of fiscal 2025 decreased due primarily to lower sales of our wafer cleaning equipment from the prolonged weakness in the mature node semiconductor market.

Orders and Backlog

New orders booked by reportable segment were as follows, dollars in thousands:

Our backlog by reportable segment was as follows, dollars in thousands:

As of March 31, 2025, one of our Thermal Processing Solutions segment customers individually accounted for 11% of our backlog. Additionally, one customer of both our Thermal Processing Solutions and Semiconductor Fabrication Solutions segments accounted for 26% of our backlog. No other customer accounted for more than 10% of our backlog as of March 31, 2025. The orders included in our backlog are generally credit approved customer purchase orders believed to be firm and are generally expected to ship within the next twelve months. Our backlog at any point in time is not necessarily representative of actual sales for succeeding periods, nor is backlog any assurance that we will realize profit from completing these orders. During the six months ended March 31, 2025, the improvement in lead times across all of our product lines contributed favorably to the decline in our backlog.

Gross Profit and Gross Margin

Gross profit is the difference between net revenue and cost of goods sold and intangible asset impairment. Cost of goods sold consists of purchased material, labor and overhead to manufacture equipment and spare parts and the cost of service and support to customers for installation, warranty and paid service calls. Gross margin is gross profit as a percent of net revenue. Our gross profit and gross margin by business segment were as follows, dollars in thousands:

Our gross margins can be affected by capacity utilization, material costs, and the type and volume of machines and consumables sold each quarter. Gross margin for the three months ended March 31, 2025 and 2024 was negative $0.3 million (2% of net revenue) and $8.5 million (33% of net revenue), respectively, a decrease of $8.8 million. Gross margin for the six months ended March 31, 2025 and 2024 was $9.0 million (23% of net revenue) and $16.7 million (33% of net revenue), respectively, a decrease of $7.6 million. Gross margin on products from both our Thermal Processing Solutions segment and our Semiconductor Fabrication Solutions segment decreased compared to the three months and six months ended March 31, 2024, due to lower revenue and higher inventory write-downs. Inventory write-downs increased due to product mix changes shifting away from solutions aligned to mature semiconductor nodes at our end customers.

Selling, General and Administrative

Selling, general and administrative (“SG&A”) expenses consist of the cost of employees, consultants and contractors, facility costs, sales commissions, shipping costs, promotional marketing expenses, legal and accounting expenses and bad debt expense.

SG&A expenses for the three months ended March 31, 2025 and 2024 were $7.1 million and $8.3 million, respectively. SG&A expenses for the six months ended March 31, 2025 and 2024 were $15.2 million and $16.8 million, respectively. SG&A decreased compared to the three months and six months ended March 31, 2024, due to fixed cost reductions and lower commissions.

Research, Development and Engineering

Research, development and engineering (“RD&E”) expenses consist of the cost of employees, consultants and contractors who design, engineer and develop new products and processes as well as materials and supplies used in producing prototypes. RD&E expenses may vary from period to period depending on the engineering projects in process. Expenses related to engineers working on strategic projects or sustaining engineering projects are recorded in RD&E. However, from time to time we add functionality to our products or develop new products during engineering and manufacturing to fulfill specifications in a customer’s order, in which case the cost of development, along with other costs of the order, are charged to cost of goods sold. Occasionally, we receive reimbursements through governmental research and development grants which are netted against these expenses when certain conditions have been met.

RD&E expense, net of grants earned, for the three months ended March 31, 2025 and 2024 was $0.8 million and $0.9 million, respectively, and $1.7 million and $2.5 million in the six months ended March 31, 2025 and 2024, respectively. The decrease in RD&E is due to the timing of purchases related to specific strategic-development projects at our Thermal Processing Solutions and Semiconductor Fabrication Solutions segments. Additionally, the prior year period for the six months ended March 31, 2024, included expenditures related to new product development projects at our Semiconductor Fabrication Solutions segment, which have not recurred. Grants earned are immaterial in all periods presented.

Goodwill Impairment

During the six months ended March 31, 2025, we recognized impairment of our goodwill of $15.4 million at our Semiconductor Fabrication Solutions segment and $5.0 million at our Thermal Processing Solutions segment as a result of a triggering event identified at the end of the second fiscal quarter. See Note 6 for a description of the facts and circumstances leading to the goodwill impairment.

During the quarter ended December 31, 2023, we recognized impairment of our goodwill of $6.4 million at our Semiconductor Fabrication Solutions segment as a result of a triggering event identified at the end of the quarter. See Note 6 for a description of the facts and circumstances leading to the goodwill impairment.

Intangible Asset Impairment

During the six months ended March 31, 2025, we recognized impairment of our definite lived intangible assets of $2.6 million at our Semiconductor Fabrication Solutions segment. As disclosed above, this impairment was recorded within operating expenses in the Condensed Consolidated Statement of Operations. See Note 6 for a description of the facts and circumstances leading to the intangible asset impairments.

During the quarter ended December 31, 2023, we recognized impairment of our definite lived intangible assets of $1.3 million at our Semiconductor Fabrication Solutions segment. As stated above, $0.8 million of this impairment was recorded in cost of goods sold, and the remainder was recorded within operating expenses in the Condensed Consolidated Statement of Operations. See Note 6 for a description of the facts and circumstances leading to the intangible asset impairments.

Severance Expense

Severance expense was $0.2 million and $0.1 million for the three months ended March 31, 2025 and 2024, respectively. Severance expense was $0.3 million for the six months ended March 31, 2025 and 2024, respectively. For the three and six months ended March 31, 2025 and 2024, the amounts relate to staff reductions at our Thermal Processing Solutions and Semiconductor Fabrication Solutions segments.

Income Taxes

Our effective tax rate was (2.3%) and (3.5%) for the six months ended March 31, 2025 and 2024, respectively. The effective tax rate for the six months ended March 31, 2025 differs from the U.S. statutory tax rate of 21% primarily due to foreign income taxed at a foreign rate different than 21% for permanent items, including the non-deductibility of the goodwill impairment, and changes in valuation allowances. For the three months ended March 31, 2025 and 2024, we recorded income tax expense of $0.3 million and $0.2 million, respectively. For the six months ended March 31, 2025 and 2024, we recorded income tax expense of $0.7 million and $0.3 million, respectively. The quarterly income tax provision is calculated using an estimated annual effective tax rate, based upon expected annual income, permanent items, statutory rates and planned tax strategies in the various jurisdictions in which we operate. However, losses in certain jurisdictions and discrete items are excluded from the determination of the estimated annual effective tax rate.

Our future effective income tax rate depends on various factors, such as the amount of income (loss) in each tax jurisdiction, tax regulations governing each region, non-tax deductible expenses incurred as a percent of pre-tax income and the effectiveness of our tax planning strategies.