# Amtech Systems Inc: Form 10-Q for the period ended Jun 30, 2023

- Company: [Amtech Systems Inc](/companies/asys.md) (CIK 720500)
- Form: 10-Q
- Filed: 2023-08-09
- Accepted by EDGAR: Aug 9, 2023, 20:14 ET
- Period: 2023-06-30
- Accession: 0000950170-23-040599
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/720500/000095017023040599/asys-20230630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/720500/000095017023040599/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-04-01 to 2023-06-30 | $30.7m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Revenue | 9 months, 2022-10-01 to 2023-06-30 | $85.6m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Cost of revenue | 3 months, 2023-04-01 to 2023-06-30 | $19.8m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2022-10-01 to 2023-06-30 | $52.9m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-04-01 to 2023-06-30 | $11.0m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2022-10-01 to 2023-06-30 | $32.8m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-04-01 to 2023-06-30 | $10.3m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2022-10-01 to 2023-06-30 | $30.9m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-04-01 to 2023-06-30 | −$1.1m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2022-10-01 to 2023-06-30 | −$3.3m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-04-01 to 2023-06-30 | $200.0k | us-gaap:InterestExpense |
| Interest expense | 9 months, 2022-10-01 to 2023-06-30 | $300.0k | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-04-01 to 2023-06-30 | $211.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2022-10-01 to 2023-06-30 | −$2.7m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-04-01 to 2023-06-30 | −$1.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2022-10-01 to 2023-06-30 | −$567.0k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-04-01 to 2023-06-30 | −$0.07 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2022-10-01 to 2023-06-30 | −$0.04 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-04-01 to 2023-06-30 | −$0.07 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2022-10-01 to 2023-06-30 | −$0.04 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-04-01 to 2023-06-30 | 14,058,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2022-10-01 to 2023-06-30 | 14,031,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2022-10-01 to 2023-06-30 | −$7.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2022-10-01 to 2023-06-30 | $1.9m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-06-30 | $14.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-06-30 | $83.0m | us-gaap:AssetsCurrent |
| Total assets | at 2023-06-30 | $146.4m | us-gaap:Assets |
| Current liabilities | at 2023-06-30 | $27.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-06-30 | $47.7m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-06-30 | $98.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 31,478 characters.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our “Condensed Consolidated Financial Statements” in Item 1 of this Quarterly Report on Form 10-Q (“Quarterly Report”) and our consolidated financial statements and related notes included in “Item 8. Financial Statements and Supplementary Data” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022 (the “2022 Form 10-K”).

### Overview

We are a leading, global manufacturer of capital equipment, including thermal processing and wafer polishing, and related consumables used in fabricating semiconductor devices, such as silicon carbide (“SiC”) and silicon power, analog and discrete devices, and electronic assemblies and modules focusing on enabling technologies for electric vehicles (EV) and clean technology (CleanTech) applications. We sell these products to semiconductor device and module manufacturers worldwide, particularly in Asia, North America and Europe.

We operate in two reportable segments, based primarily on the industry they serve: (i) Semiconductor and (ii) Material and Substrate. In our Semiconductor segment, we supply thermal processing equipment, including solder reflow ovens, horizontal diffusion furnaces and custom high-temp belt furnaces for use by semiconductor, electronics and electro/mechanical assembly manufacturers. Our semiconductor customers are primarily manufacturers of integrated circuits and optoelectronic sensors and discrete (“O-S-D”) components used in analog, power and radio frequency (“RF”). In our Material and Substrate segment, we produce substrate consumables, chemicals and machinery for lapping (fine abrading) and polishing of materials, such as silicon wafers for semiconductor products, sapphire wafers for LED applications, and compound substrates, like silicon carbide wafers, for power device applications.

The semiconductor industry is cyclical, but not seasonal, and historically has experienced fluctuations. Our revenue is impacted by these broad industry trends.

### Strategy

We continue to focus on our plans to profitably grow our business and have developed a strategic growth plan and a capital allocation plan that we believe will support our growth objectives. Our power semiconductor strategic growth plan leverages our experience, products and capabilities in pursuit of growth, profitability and sustainability. Our core focus areas are:

- Emerging opportunities in the SiC industry – We believe we are well-positioned to participate in this significant growth area, specifically as it relates to silicon carbide wafer capacity expansion. We are working closely with our customers to understand their SiC growth plans, needs and opportunities. We are investing in our capacity, next generation product development, and in our people. During the second quarter of 2023, we completed the acquisition of Entrepix, Inc. (“Entrepix”), which added chemical mechanical polishing (“CMP”) and wafer cleaning equipment to our existing substrate polishing and wet process chemical offerings. During 2021, we completed the acquisition of Intersurface Dynamics, Inc. (“Intersurface Dynamics”), which added numerous coolants and chemical products to our existing consumable and machine product lines. We believe these investments will help fuel our growth in the emerging growth SiC industry.
- 300mm Horizontal Diffusion Furnace – We have a highly successful and proven 300mm horizontal diffusion furnace solution used for power semiconductor device manufacturing applications. We have a strong foundation with the leading 300mm power chip manufacturer. We believe we have a strong opportunity to continue expanding our customer base and grow revenue with our 300mm solution.
- As the largest revenue contributor to our organization, we expect our subsidiary, BTU International, Inc. (“BTU”), will continue to track semiconductor industry growth cycles for our advanced semi-packaging and surface-mount technology products, in addition to specialized custom belt furnaces used in automotive and other specialized industrial applications. We believe that our investments in product innovation will

provide BTU with opportunities to grow further, especially in high growth applications of consumer and industrial electronics, Internet of Things, electric vehicles and 5G communications.

We anticipate future investments will be required to meet the expected demand from the growing markets we serve to achieve our revenue growth targets, including investments in research and development as well as capital expenditures, which also includes additional investments in capacity expansion, talent, and management information systems. In June 2022, we completed the sale of the real property where our manufacturing facility in Massachusetts is located. In connection with this sale, we entered into a two-year leaseback of the facility. This sale-leaseback transaction resulted in a net cash inflow of approximately $14.9 million, after repayment of the existing mortgage and settlement of related sale expenses. During the two-year leaseback period, we are exploring various options, including negotiating with the landlord for an extension of the lease-back period and conducting a search for a new manufacturing facility more in line with the needs of our Semiconductor product lines. In addition, we are evaluating business continuity and resiliency within our operations, our management information systems, and our needs to allow for greater efficiencies and to ensure our infrastructure can support our future growth plans. As a capital equipment manufacturer, we will continue to invest in our business to drive future growth.

In addition to investments in our organic growth, another key aspect of our capital allocation policy is our plan to grow through acquisitions. We have the expertise and track record to identify complimentary and synergistic acquisition targets in the Semiconductor and SiC growth environments and to execute transactions and integrations to provide for value creating, profitable growth in both the short-term and long-term. On March 3, 2021, we acquired Intersurface Dynamics, a Connecticut-based manufacturer of substrate process chemicals used in various manufacturing processes, including semiconductors, silicon and compound semiconductor wafers, and optics. On January 17, 2023, we acquired Entrepix, an Arizona-based expert in CMP and wafer cleaning. As of the date of the filing of this Quarterly Report, we do not have an agreement to acquire any additional acquisition target.

### COVID-19 Update

On March 28, 2022, the Chinese government issued a mandatory shutdown in Shanghai, the location of one of our manufacturing facilities. The factory was allowed to partially reopen in May 2022 and fully reopened on June 1, 2022. After such reopening, the factory was able to operate near full capacity for the entire month of June. We were able to make up the shipments missed in the fourth quarter of fiscal 2022 and are now operating at normal capacity levels. Given the uncertainty surrounding the COVID-19 pandemic, there can be no assurance that our Shanghai facility will be allowed to remain open on a consistent basis.

### Results of Operations

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

|  | Three Months Ended June 30, 2023 | 2022 | Nine Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Net revenue | 100% | 100% | 100% | 100% |
| Cost of sales | 64% | 70% | 62% | 64% |
| Gross margin | 36% | 30% | 38% | 36% |
| Selling, general and administrative | 34% | 36% | 36% | 28% |
| Research, development and engineering | 6% | 8% | 6% | 7% |
| Gain on sale of fixed assets | —% | (62)% | —% | (17)% |
| Severance expense | —% | —% | —% | —% |
| Operating (loss) income | (4)% | 48% | (4)% | 18% |
| Interest income (expense) and other, net | 1% | 3% | —% | 1% |
| (Loss) income before income taxes | (3)% | 51% | (4)% | 19% |
| Income tax provision (benefit) | —% | —% | (3)% | 1% |
| Net (loss) income | (3)% | 51% | (1)% | 18% |

24

### 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:

| Segment | Three Months Ended June 30, 2023 | 2022 | Change | % Change | Nine Months Ended June 30, 2023 | 2022 | Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Semiconductor | 19,841 | $15,135 | $4,706 | 31% | 58,775 | $61,484 | $(2,709) | (4)% |
| Material and Substrate | 10,899 | 4,829 | 6,070 | 126% | 26,833 | 12,499 | 14,334 | 115% |
| Total net revenue | $30,740 | $19,964 | $10,776 | 54% | $85,608 | $73,983 | $11,625 | 16% |

Total net revenue for the three months ended June 30, 2023 and 2022 was $30.7 million and $20.0 million, respectively, an increase of approximately $10.8 million or 54%. Our Semiconductor results for the third quarter of fiscal 2023 reflect increases in our belt furnace, surface-mount technology (“SMT”), and packaging equipment production, partially offset by decreases in shipments of our horizontal diffusion furnaces. We continue to experience softness in shipments of our advanced packaging and SMT equipment, primarily related to a slowdown in global demand in the consumer markets. Our Semiconductor results for the third quarter of fiscal 2022 reflect the closure of our Shanghai manufacturing facility, which partially reopened in mid-May and fully reopened on June 1, 2022. Material and Substrate revenue increased due to the addition of Entrepix, effective January 17, 2023. Entrepix accounted for approximately $7.2 million of revenue in the Material and Substrate segment during the quarter ended June 30, 2023.

Total net revenue for the nine months ended June 30, 2023 and 2022 was $85.6 million and $74.0 million, respectively, an increase of approximately $11.6 million or 16%. Revenue from the Semiconductor segment decreased $2.7 million compared to the prior year period. This decrease is primarily attributable to lower shipments of our SMT, advanced packaging and horizontal diffusion furnace product lines, partially offset by increased shipments of high temperature belt furnaces and increased parts and services revenues. Revenue from our Material and Substrate segment increased $14.3 million due to the addition of Entrepix, effective January 17, 2023, and increased shipments of consumables resulting from capacity expansion and production increases by our customers.

### Orders and Backlog

New orders booked in the three and nine months ended June 30, 2023 and 2022 were as follows, dollars in thousands:

| Segment | Three Months Ended June 30, 2023 | 2022 | Change | % Change | Nine Months Ended June 30, 2023 | 2022 | Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Semiconductor | $18,293 | $24,144 | $(5,851) | (24)% | $63,983 | $79,992 | $(16,009) | (20)% |
| Material and Substrate | 7,924 | 6,001 | 1,923 | 32% | 21,729 | 15,485 | 6,244 | 40% |
| Total new orders | $26,217 | $30,145 | $(3,928) | (13)% | $85,712 | $95,477 | $(9,765) | (10)% |

Our backlog as of June 30, 2023 and 2022 was as follows, dollars in thousands:

| Segment | June 30, 2023 | 2022 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Semiconductor | $53,219 | $58,344 | $(5,125) | (9)% |
| Material and Substrate | 8,096 | 4,387 | 3,709 | 85% |
| Total backlog | $61,315 | $62,731 | $(1,416) | (2)% |

As of June 30, 2023, one customer of both our Semiconductor and Material and Substrate segments accounted for 19% of our backlog. Additionally, three Semiconductor segment customers individually accounted for 20%, 17% and

13% of our backlog. No other customer accounted for more than 10% of our backlog as of June 30, 2023. 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. Because our orders are typically subject to cancellation or delay by the customer, our backlog at any point in time is not necessarily representative of actual sales for future periods, nor is backlog any assurance that we will realize profit from completing these orders.

### Gross Profit and Gross Margin

Gross profit is the difference between net revenue and cost of goods sold. 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:

| Segment | Three Months Ended June 30, 2023 | Gross Margin | 2022 | Gross Margin | Change | Nine Months Ended June 30, 2023 | Gross Margin | 2022 | Gross Margin | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Semiconductor | $6,707 | 34% | $3,590 | 24% | $3,117 | $21,810 | 37% | $21,507 | 35% | $303 |
| Material and Substrate | 4,278 | 39% | 2,310 | 48% | 1,968 | 10,948 | 41% | 5,451 | 44% | 5,497 |
| Total gross profit | $10,985 | 36% | $5,900 | 30% | $5,085 | $32,758 | 38% | $26,958 | 36% | $5,800 |

Our gross margins can be affected by capacity utilization and the type and volume of machines and consumables sold each quarter. Gross profit for the three months ended June 30, 2023 and 2022 was $11.0 million (36% of net revenue) and $5.9 million (30% of net revenue), respectively, an increase of $5.1 million. Gross margin on products from our Semiconductor segment increased due to changes in our product mix and improved capacity utilization in our Billerica and Shanghai facilities. Gross margin on products from our Semiconductor segment were lower in the prior year period due to the above-mentioned closure of our Shanghai manufacturing facility. Gross margin on products from our Material and Substrate segment decreased compared to the three months ended June 30, 2022, due to higher equipment sales, primarily at Entrepix, which have lower margins than our consumables. We are experiencing increased material costs across all our segments. In response to such increased costs, we continually review our pricing plans and supplier agreements, with the objective of passing these increased costs to our customers where possible; however, we continue to experience pricing pressure from our customers. We are also exploring partnerships with contract manufacturers, who can leverage their buying power on a larger scale. Additionally, we have experienced rising labor costs across our divisions, and we expect this trend to continue, as the labor markets in which we operate remain competitive.

Gross profit for the nine months ended June 30, 2023 and 2022 was $32.8 million (38% of net revenue) and $27.0 million (36% of net revenue), respectively, an increase of $5.8 million. Gross margin on products from our Semiconductor segment increased slightly compared to the nine months ended June 30, 2022. Gross margin on products from our Material and Substrate segment decreased between periods due to higher equipment sales, primarily at Entrepix, which have lower margins than our consumables.

### Selling, General and Administrative

Selling, general and administrative expenses (“SG&A”) consists 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 June 30, 2023 and 2022 were $10.3 million and $7.2 million, respectively. SG&A increased compared to the prior year quarter due primarily to $1.9 million of added SG&A from our acquisition of Entrepix as well as increased consulting and ERP project expenses.

SG&A expenses for the nine months ended June 30, 2023 and 2022 were $30.9 million and $21.0 million, respectively. SG&A increased compared to the prior year period due primarily to $3.8 million of added SG&A from our acquisition of Entrepix, $3.2 million of transaction expenses related to the acquisition of Entrepix and $2.0 million of audit and consulting expenses.

### 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 June 30, 2023 and 2022 were $1.8 million and $1.6 million, respectively, and $4.7 million and $5.0 million in the nine months ended June 30, 2023 and 2022, respectively. The decrease in RD&E in the nine-month period is due to the timing of purchases related to specific strategic-development projects at our Semiconductor segment. Grants earned are immaterial in all periods presented.

### Severance Expense

We recorded severance expense of $0.4 million in the nine months ended June 30, 2023. This one-time charge relates to the retirement of our founder, Mr. J.S. Whang. There was no severance expense recorded in the three and nine months ended June 30, 2022.

### Income Taxes

Our effective tax rate was 82.8% and 6.0% for the nine months ended June 30, 2023 and 2022, respectively. The effective tax rate for the nine months ended June 30, 2023 differs from the U.S. statutory tax rate of 21% primarily due to the release of a portion of our valuation allowance in connection with a deferred tax liability related to the Entrepix acquisition resulting in recognition of previously recorded deferred tax assets. For the three months ended June 30, 2023 and 2022, we recorded income tax expense of $0.2 million and $20,000, respectively. For the nine months ended June 30, 2023 and 2022, we recorded income tax benefit of $2.7 million and income tax expense of $0.8 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.

Generally accepted accounting principles of the United States (“GAAP”) require that a valuation allowance be established when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. A review of all available positive and negative evidence needs to be considered, including a company’s performance, the market environment in which the company operates and the length of carryback and carryforward periods. According to those principles, it is difficult to conclude that a valuation allowance is not needed when the negative evidence includes cumulative losses in recent years. Based on the consideration of all available evidence, we have concluded that we will maintain a full valuation allowance for all net deferred tax assets related to the carryforwards of U.S. net operating losses and foreign tax credits. We will continue to monitor our cumulative income and loss positions in the U.S. and foreign jurisdictions to determine whether full valuation allowances on U.S. net deferred tax assets are appropriate.

We expect to pay minimal U.S federal cash taxes for the foreseeable future as a result of our U.S. net operating losses that are carried forward.

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.

### Liquidity and Capital Resources

The following table sets forth for the periods presented certain consolidated cash flow information, in thousands:

|  | Nine Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: |
| Net cash (used in) provided by operating activities | $(7,150) | $5,090 |
| Net cash (used in) provided by investing activities | (36,854) | 19,583 |
| Net cash provided by (used in) financing activities | 11,590 | (8,855) |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (155) | (441) |
| Net (decrease) increase in cash, cash equivalents and restricted cash | (32,569) | 15,377 |
| Cash and cash equivalents, beginning of period | 46,874 | 32,836 |
| Cash, cash equivalents and restricted cash, end of period | $14,305 | $48,213 |

### Cash and Cash Flow

The decrease in cash and cash equivalents from September 30, 2022 of $32.6 million was primarily due to the acquisition of Entrepix, which was partially funded with cash on-hand as well as with a new term loan (see Note 2). We maintain a portion of our cash and cash equivalents in Renminbis, a Chinese currency, at our operations in China; therefore, changes in the exchange rates have an impact on our cash balances. Our working capital was $56.0 million as of June 30, 2023 and $80.3 million as of September 30, 2022. The decrease in working capital was primarily due to the decrease in cash. Our ratio of current assets to current liabilities was 3.1:1 as of June 30, 2023, and 4.5:1 as of September 30, 2022.

During periods of weakening demand, we typically generate cash from operating activities. Conversely, we are more likely to use operating cash flows for working capital requirements during periods of higher growth. The success of our growth strategy is dependent upon the availability of additional capital resources on terms satisfactory to management. Our sources of capital in the past have included the sale of equity securities, which includes common stock sold in private transactions and public offerings, the incurrence of long-term debt and customer deposits. Additionally, in January 2023, we entered into a credit facility, which includes a revolving line of credit with availability up to $8.0 million. There can be no assurance that we can raise such additional capital resources when needed or on satisfactory terms. We believe that our principal sources of liquidity discussed above are sufficient to support operations for at least the next twelve months. We have never paid dividends on our common stock.

### Cash Flows from Operating Activities

Cash used in our operating activities was approximately $7.2 million for the nine months ended June 30, 2023, compared to $5.1 million provided by operating activities for the nine months ended June 30, 2022. During the first nine months of fiscal 2023, we used cash to increase our inventory balances in preparation for shipments scheduled over the next four quarters and to pay the related accounts payable. During the nine months ended June 30, 2022, we received several large customer deposits, primarily related to orders of our horizontal diffusion and high temp furnaces, which were expected to ship over the next two quarters. During the 2022 period, our accounts receivable collections exceeded new accounts receivable, primarily due to the shutdown of our Shanghai facility.

### Cash Flows from Investing Activities

Cash used in investing activities was $36.9 million in the nine months ended June 30, 2023, and cash provided by investing activities was $19.6 million in the nine months ended June 30, 2022. The fiscal 2023 amount consists primarily of cash paid for the acquisition of Entrepix. The fiscal 2022 amount consists of $19.9 million in proceeds from the sale of our real property in Billerica, Massachusetts as well as $0.3 million of capital expenditures. We expect capital expenditures to increase throughout fiscal 2023 as we make targeted investments in our IT systems and additional capacity improvements.

### Cash Flows from Financing Activities

For the nine months ended June 30, 2023, cash provided by financing activities was $11.6 million, comprised of $12.0 million in borrowings on our term loan and $0.5 million of proceeds received from the exercise of stock options partially offset by $0.9 million in payments on long-term debt. For the nine months ended June 30, 2022, $8.9 million of cash used in financing activities was comprised of $4.1 million of cash used for the repurchase of common stock and payments on long-term debt of $4.9 million, partially offset by $0.1 million of proceeds received from the exercise of stock options. Fiscal 2022 payments on long-term debt include the full repayment of the $4.5 million mortgage balance on the real property in Billerica, Massachusetts.

### Financing Facilities

Our debt balance as of June 30, 2023 was $11.2 million, including our finance lease obligations. Our credit facility contains various covenants customary for transactions of this type, including complying with a minimum Debt to EBITDA ratio, a Fixed Charge Coverage ratio and a Working Capital ratio (as defined in the agreements) and meeting quarterly and annual reporting requirements. The credit facility agreement contains customary affirmative and negative covenants and events of default for facilities of this type. At June 30, 2023, we were in compliance with all such covenants.

### Off-Balance Sheet Arrangements

As of June 30, 2023, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K promulgated by the SEC that have or are reasonably likely to have a current or future effect on financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

### Contractual Obligations

Unrecorded purchase obligations were $26.1 million as of June 30, 2023, compared to $20.0 million as of September 30, 2022, an increase of $6.1 million.

In January 2023, we entered into a Loan and Security Agreement with UMB Bank. See Note 2 “Long-Term Debt” of our condensed consolidated financial statements for a description of this agreement. There were no other material changes to the contractual obligations included in "Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2022 Form 10-K.

### Critical Accounting Estimates

"Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report discusses our condensed consolidated financial statements that have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the condensed consolidated financial statements, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, income taxes, inventory valuation, and goodwill. We base our estimates and judgments on historical experience, expectations regarding the future and on various other factors that we believe to be reasonable under the circumstances. The results of these estimates and judgments form the basis for making conclusions about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

A critical accounting estimate is one that is both important to the presentation of our financial position and results of operations, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. These uncertainties are discussed in Part I, Item 1A of our 2022 Form 10-K. We believe our critical accounting estimates relate to the more significant judgments and estimates used in the preparation of our consolidated financial statements.

We believe the critical accounting estimates discussed in the section entitled “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” in our 2022 Form 10-K represent the most significant judgments and estimates used in the preparation of our consolidated financial statements. There have been no material changes in our critical accounting estimates during the nine months ended June 30, 2023, except as set forth below.

### Business Combinations

We follow the acquisition method of accounting to record identifiable assets acquired and liabilities assumed in connection with acquired businesses at their estimated fair value as of the date of acquisition.

Identifiable intangible assets from business combinations are recognized at their estimated fair values as of the date of acquisition and consist of non-compete agreements, backlog, customer relationships, developed technology and tradenames. Determination of the estimated fair value of identifiable intangible assets requires judgment. The fair value of acquired identifiable intangible assets were estimated using various valuation methodologies. The multi-period excess earnings method was used to value the acquired developed technology and the distributor method for the acquired customer relationships. Both approaches are income-based methods, which required judgment in estimating appropriate discount rates, obsolescence, customer attrition, and remaining useful lives. The acquired intangible assets all had finite lives, ranging from one to ten years. The fair value of identifiable intangible assets acquired in connection with the Acquisition was $13.6 million. Goodwill represents the excess of the fair value of the consideration conveyed in an acquisition over the fair value of net assets acquired. See Note 3 “Acquisition” for additional information.

### Impact of Recently Issued Accounting Pronouncements

For discussion of the impact of recently issued accounting pronouncements, see “Part I, Item 1. Financial Information” under “Impact of Recently Issued Accounting Pronouncements.”

## Market risk

As filed, 256 characters.

As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and, therefore, are not required to provide the information requested by this Item.

## Controls and procedures

As filed, 2,352 characters.

### Disclosure Controls and Procedures

Our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), has carried out an evaluation of the effectiveness of our disclosure controls and procedures as of June 30, 2023, pursuant to Exchange Act Rules 13a-15(e) and 15(d)-15(e). Disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including the principal executive and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon that evaluation, our CEO and CFO have concluded that as of such date, our disclosure controls and procedures in place were effective. We completed the acquisition of Entrepix on January 17, 2023. As permitted under U.S. Securities and Exchange Commission guidance, management’s assessment as of June 30, 2023 did not include an assessment of controls and procedures of Entrepix, which is included in the consolidated financial statements as of June 30, 2023.

### Changes in Internal Control Over Financial Reporting

Except as described below, there have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the third fiscal quarter to which this report relates that materially affected, or are reasonably likely to materially affect, the internal control over financial reporting of the Company.

As noted above, on January 17, 2023 we completed the acquisition of Entrepix. We are currently integrating Entrepix into our control environment. In executing this integration, we are analyzing, evaluating, and where necessary, making changes in controls and procedures related to the Entrepix business, which is expected to be completed in the year ended September 30, 2024.

## Risk factors

As filed, 1,315 characters.

We refer you to documents filed by us with the SEC, specifically “Item 1A. Risk Factors” in our 2022 Form 10-K and in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023 (the “March 2023 Quarterly Report”), which identify important risk factors that could materially affect our business, financial condition and future results. We also refer you to the factors and cautionary language set forth in the section entitled “Cautionary Statements Regarding Forward-Looking Statements” immediately preceding “Item 1. Condensed Consolidated Financial Statements” of this Quarterly Report. This Quarterly Report, including the accompanying condensed consolidated financial statements and related notes, should be read in conjunction with such risks and other factors for a full understanding of our operations and financial condition. The risks described in our 2022 Form 10-K and March 2023 Quarterly Report and any described herein are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results. There have been no material changes to the risk factors previously disclosed in our 2022 Form 10-K or March 2023 Quarterly Report.

Filed Aug 9, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-040599. Last ingested by Listed: Oct 24, 2026, 14:56 ET. No prices; not investment advice.