Amtech Systems, Inc. — Q3 FY2016 Form 10-Q
Business context and reporting period. Amtech manufactures capital equipment, automation and related products for solar, semiconductor and polishing markets. This filing covers the three and nine months ended June 30, 2016; the fiscal year ends September 30. Its markets are cyclical, and equipment shipment and customer-acceptance timing can materially affect reported results.
Financial highlights
| Metric | Three months ended June 30, 2016 | Nine months ended June 30, 2016 |
|---|---|---|
| Revenue | $33.3 million, down 17% year over year | $77.9 million, up 2% |
| Gross profit / margin | $9.6 million / 29%, versus $10.1 million / 25% | $21.6 million / 28%, versus $20.4 million / 27% |
| Operating loss | $0.6 million, versus $1.2 million | $8.1 million, versus $8.0 million |
| Net loss attributable to Amtech | $1.2 million; loss per share $0.09 | $6.7 million; loss per share $0.51 |
| Operating cash flow | Not separately reported for the quarter | Cash used: $9.6 million, versus $12.4 million |
For the nine-month period, the reported $2.6 million operating loss improvement before other items did not occur: operating loss was $8.1 million versus $8.0 million. The $2.6 million gain on sale of Kingstone-related rights contributed to a lower pre-tax loss, while a $1.7 million tax charge on that gain helped lift the nine-month tax provision to $2.0 million.
Balance sheet and liquidity. At June 30, 2016, cash and cash equivalents were $28.3 million, restricted cash $0.6 million, working capital $45.4 million, and the current ratio 2.0:1. Total debt was approximately $10.3 million, including $0.7 million current and $9.6 million long term. Total liabilities were $60.4 million. Cash rose $2.4 million from fiscal year-end, mainly reflecting $7.0 million from the partial Kingstone interest sale and $4.9 million from sale of associated rights, offset in part by operating cash use. Management said available liquidity should support operations for at least the next 12 months.
Changes, segments and notable items
- Q3 revenue declined mainly because solar shipments were lower: solar revenue fell 22% year over year, semiconductor fell 6%, and polishing fell 20%. Solar shipments included fewer PECVD systems; higher ALD sales partly offset the decline. Semiconductor revenue also faced lower shipments, while polishing was affected by competitive pressure and currency strength.
- Nine-month semiconductor revenue rose 30%, largely because BTU contributed nine months of results in 2016 versus five months in 2015. Solar revenue fell 9% and polishing revenue fell 30%.
- Q3 SG&A decreased to $8.7 million from $10.1 million, including savings from cost reductions and lower commissions and shipping. Net research and development expense increased to $1.6 million from $1.3 million for the quarter, as lower grant reimbursements more than offset lower gross spending.
- Backlog was $63.8 million at June 30, up 36% year over year; $45.3 million related to solar orders and deferred revenue. Quarterly bookings were $30.0 million, and one customer represented 29% of backlog. Orders may be delayed or canceled and do not assure future revenue or profit.
- Kingstone was deconsolidated in fiscal 2015; Amtech retained a 15% equity interest. In Q2 FY2016, it received $4.9 million for exclusive solar ion-implant equipment sales and service rights and recorded a $2.6 million gain. Q3 included a $0.4 million equity-method investment loss; the nine-month period included $0.2 million investment income.
Outlook, risks and contingencies
The filing provides no specific revenue or earnings guidance. Management emphasized variability in orders, shipments and customer acceptance, and stated that solar and semiconductor markets are cyclical. It also cited risks from customer delays or cancellations, foreign-exchange movements, competitive pressure, and the need to develop or acquire successful products. A 10% currency move could change the value of foreign net investments by about $2.1 million in other comprehensive income or loss and could change expected gross profit on foreign-currency sales commitments by about $1.2 million.
Purchase obligations were $15.8 million, up from $9.8 million at September 30, 2015; actual payments may be lower if commitments are renegotiated or canceled. The company reported no off-balance-sheet arrangements. The BTU stockholder litigation settlement was approved and paid; the company said other pending proceedings were not expected to materially affect its financial position, results or liquidity, while noting potential uncertainty from future claims. Management reported disclosure controls were effective and no material change in internal control during the period.
Investor verification priorities
- Assess whether the backlog converts to shipments, accepted revenue and profit, given cancellation rights, customer-acceptance deferrals and the 29% customer concentration.
- Track operating cash use and working-capital demands, particularly the increase in inventory and customer deposits, alongside management’s 12-month liquidity assessment.
- Separate recurring operating performance from the Kingstone rights-sale gain and evaluate the associated tax charge and remaining investment exposure.
- Monitor segment recovery, especially solar PECVD and polishing, and whether semiconductor growth persists beyond the acquisition-comparison effect.
- Review debt maturities and interest terms, purchase commitments, deferred revenue and profit, and foreign-exchange exposure.