Amtech Systems, Inc. — Q3 FY2015 Form 10-Q
Reporting period: Three and nine months ended June 30, 2015; filed August 6, 2015. Amounts below are in U.S. dollars. Results include BTU from its January 30, 2015 acquisition and SoLayTec from December 24, 2014; comparisons with 2014 are therefore not wholly like-for-like.
Financial performance
| Metric | Three months ended June 30 | Nine months ended June 30 |
|---|---|---|
| Revenue | $40.0 million, up 335% from $9.2 million | $76.7 million, up 109% from $36.7 million |
| Gross profit / margin | $10.1 million / 25%, versus $1.6 million / 18% | $20.4 million / 27%, versus $9.1 million / 25% |
| Operating loss | $1.2 million, versus $3.9 million | $8.0 million, versus $8.9 million |
| Net loss attributable to Amtech | $1.6 million; loss per share $0.12, versus $5.3 million and $0.53 per share | $9.1 million; loss per share $0.78, versus $9.8 million and $1.01 per share |
Quarterly revenue growth reflected higher solar sales and BTU’s contribution to the semiconductor segment. In the nine-month period, solar revenue rose 99%, semiconductor revenue rose 204% primarily due to BTU, and polishing revenue rose 24%. SG&A was $10.1 million in the quarter and $24.5 million for nine months; nine-month SG&A included $1.8 million of BTU transaction expenses. R&D expense, net of grants, was $3.9 million for nine months, down from $4.4 million.
Cash flow, balance sheet and liquidity
- Operating cash flow was negative $12.4 million for the nine months, compared with negative $6.8 million in 2014. The filing cites operating losses, $4.8 million of tax payments, and working-capital investment as uses of cash.
- Investing cash flow was positive $8.1 million, principally reflecting $8.6 million of net cash acquired in acquisitions. Financing cash flow was positive $0.8 million. Cash and cash equivalents fell $3.7 million to $23.7 million; restricted cash was $1.6 million.
- Working capital was $41.7 million; the current ratio was 1.9:1. Total assets were $134.1 million and total liabilities $62.5 million at June 30, 2015.
- Long-term debt was $8.6 million, with $0.7 million of current maturities. Debt acquired with BTU and SoLayTec carries stated rates of 4.4% and 5.95%–10%, respectively.
- Amtech reported a $3.2 million foreign-currency translation loss for the nine months. A 10% currency movement against the U.S. dollar would change other comprehensive income or loss by approximately $2.1 million, based on its foreign net investment.
Material developments, outlook and risks
- BTU was acquired in an all-stock merger; Amtech issued approximately 3.19 million shares. Amtech also acquired a 51% controlling interest in SoLayTec. Acquisition accounting for both transactions remained subject to final valuation items.
- Backlog was $46.9 million at June 30, 2015, versus $39.4 million a year earlier; quarterly orders were $30.2 million versus $17.9 million. Backlog is subject to customer cancellation or delay and is not assurance of sales or profit. Three customers represented 22%, 15% and 11% of backlog.
- Management said existing principal liquidity sources should support operations for at least the next twelve months. The filing provides no specific revenue or earnings guidance. Management emphasized that solar and semiconductor markets are cyclical and results depend on product development, acquisitions and adapting to industry cycles.
- Equipment revenue can depend on shipment, installation or customer acceptance. Delayed acceptance or collection could defer revenue and cash receipts. Two customers represented 18% and 12% of nine-month revenue; one customer represented 12% of receivables.
- Purchase obligations were $14.1 million, up from $7.9 million at September 30, 2014. A BTU-related shareholder lawsuit settlement was filed for court approval; approval was not assured, and certain securities-law claims were excepted from the proposed release. The filing also reported a $0.1 million remaining EPA cleanup liability.
- In July 2015, the board authorized a Kingstone restructuring, subject to closing conditions and regulatory approvals. The proposed transactions would reduce Amtech’s ownership interest from 55% to 15%; Amtech expected approximately $4.0 million for part of its equity and repayment of a separate $4.0 million loan. A sales-and-service-rights agreement included a proposed $5.6 million payment by the earlier of March 31, 2016 or commencement of a public offering process. Closing was expected by August 31, 2015, but was not assured.
Important facts for investors to verify
- How much of reported revenue and improved quarterly margin reflects acquired businesses versus underlying organic demand, and whether profitability can be sustained.
- Whether operating cash use, receivables and inventory growth improve, and whether backlog converts to recognized revenue and cash on expected terms.
- Final purchase accounting, integration costs and realization of any expected acquisition synergies.
- Completion and terms of the Kingstone transactions, including receipt of the stated cash proceeds and loan repayment.
- Court approval and final status of the BTU shareholder settlement, plus developments in tax asset valuation allowances and customer acceptance or collection risks.