Amtech Systems, Inc. — Q2 FY2015 Form 10-Q
Reporting period: Three and six months ended March 31, 2015. Amtech supplies thermal-processing and related equipment and products to solar, semiconductor, electronics, LED and polishing markets. Results include BTU from its January 30, 2015 acquisition and SoLayTec from December 24, 2014; prior segment figures were recast, but reported results are not fully comparable because of the acquisitions.
Key financial results
| Metric | Three months ended March 31, 2015 | Six months ended March 31, 2015 |
|---|---|---|
| Revenue | $24.3 million, up 91% year over year | $36.7 million, up 33% |
| Gross profit / margin | $6.9 million / 28%, versus $2.9 million / 23% | $10.3 million / 28%, versus $7.4 million / 27% |
| Operating loss | $1.9 million, versus $4.5 million | $6.7 million, versus $5.0 million |
| Net loss attributable to Amtech | $2.3 million; loss per share $0.19, versus $3.8 million and $0.39 | $7.5 million; loss per share $0.69, versus $4.5 million and $0.47 |
| Operating cash flow | Not separately presented for the quarter | Cash used: $3.0 million, versus $1.9 million |
Quarterly revenue growth reflected higher solar sales and, primarily, BTU’s inclusion in semiconductor revenue. Semiconductor revenue rose to $12.1 million from $2.3 million; solar revenue was $9.5 million, up 18%, and polishing revenue was $2.7 million, up 12%. In the six-month period, higher semiconductor and polishing sales were partly offset by weaker solar-segment gross profit, which management attributed largely to low first-quarter sales volumes.
Balance sheet and liquidity
- At March 31, 2015, cash and cash equivalents were $32.6 million, with an additional $1.6 million of restricted cash. Working capital was $42.6 million; the current ratio was 1.7:1.
- Total assets were $145.8 million, versus $89.9 million at September 30, 2014. Current liabilities were $59.7 million.
- Long-term debt was $8.5 million, plus $0.7 million of current maturities. The debt was acquired with BTU and SoLayTec; stated rates range from 4.4% to 10%.
- Six-month investing cash flow was a $8.5 million source, primarily reflecting acquired cash. Cash increased $5.2 million overall, to $32.6 million. The company used $3.0 million in operations, including cash absorbed by inventory and other working-capital needs.
Changes, outlook and risks
- BTU was acquired in an all-stock transaction valued at $26.6 million; Amtech issued approximately 3.19 million shares. The acquisition added semiconductor revenue, assets and debt. Acquisition accounting remained incomplete at quarter-end. SoLayTec added a 51% controlling interest in ALD systems.
- Backlog was $56.0 million, compared with $31.0 million a year earlier; quarterly orders were $30.9 million. Two customers represented 23% and 14% of backlog. Management cautions that orders can be canceled or delayed and backlog does not assure revenue or profit.
- Management said existing liquidity sources should support operations for at least the next 12 months, but noted growth strategy depends on access to additional capital. It expected to pay approximately $4.5 million in taxes in June 2015. No specific earnings or revenue guidance was provided.
- Purchase obligations rose to $29.8 million from $7.9 million at September 30, 2014. A customer represented 19% of six-month revenue; one customer represented 12% of receivables at quarter-end.
- Solar and semiconductor markets are cyclical; solar has faced a supply-demand imbalance. Revenue timing depends on equipment shipments, installation and customer acceptance. Delayed acceptance can defer revenue and cash collection. Foreign-currency translation losses were $3.4 million for the six months; management estimated a 10% currency movement could change other comprehensive income or loss by about $1.9 million.
- The company recorded a partial U.S. deferred-tax-asset valuation allowance after the BTU merger and increased valuation allowances for certain foreign losses. A BTU-related stockholder lawsuit settlement remained subject to final documentation and court approval. A $0.1 million remaining liability was recorded for BTU’s share of Superfund cleanup costs.
Important facts for investors to verify
- How much of revenue growth and backlog converts to recurring, profitable business after separating acquisition contributions from organic performance.
- Whether operating cash flow improves as inventory and working-capital commitments are converted to shipments and collections.
- BTU and SoLayTec integration, final purchase-price allocations, acquired debt terms and any merger or restructuring costs.
- Customer concentration, order cancellations, installation and acceptance delays, and the collectability of receivables.
- Tax payments, deferred-tax-asset valuation allowances, and the status and final terms of the stockholder-action settlement.