Amtech Systems, Inc. — Q2 FY2016 Form 10-Q
Reporting period: Three and six months ended March 31, 2016. Amtech manufactures capital equipment and related products for solar, semiconductor, and polishing markets. The filing is unaudited.
Financial performance
| Metric | Q2 FY2016 | Q2 FY2015 | Six months FY2016 | Six months FY2015 |
|---|---|---|---|---|
| Revenue | $22.5 million | $24.3 million | $44.6 million | $36.7 million |
| Gross profit / margin | $6.0 million / 27% | $6.9 million / 28% | $12.0 million / 27% | $10.3 million / 28% |
| Operating loss | $3.6 million | $1.9 million | $7.5 million | $6.7 million |
| Net loss attributable to Amtech | $1.5 million | $2.3 million | $5.5 million | $7.5 million |
| Loss per share | $0.11 | $0.19 | $0.42 | $0.69 |
Q2 revenue declined 7% year over year: solar revenue rose 4%, while semiconductor fell 13% and polishing fell 20%. Six-month revenue increased 22%, principally reflecting the BTU acquisition and higher solar revenue; polishing revenue fell 34%. Q2 gross profit declined 13%, and gross margin narrowed by one percentage point. Six-month gross profit increased 16%, but margin also narrowed by one point. Net research, development and engineering expense rose 188% in Q2 and 72% for the six-month period, largely reflecting lower government grants compared with the prior-year periods.
Cash, liquidity and debt
- Cash and cash equivalents were $31.8 million at March 31, 2016, versus $25.9 million at September 30, 2015; restricted cash was $0.5 million.
- Working capital was $44.7 million, down from $46.3 million; the current ratio was 2.1:1, versus 2.2:1.
- Operating cash flow was a use of $6.4 million for the six months, compared with a $3.0 million use a year earlier. Investing activities provided $11.7 million, mainly from Kingstone-related proceeds; financing activities provided $0.6 million. Cash increased by $6.0 million overall.
- Total debt was approximately $10.1 million, including $0.7 million current maturities. BTU-related debt had a $6.7 million balance and a 4.4% rate through September 2018; SoLayTec-related debt was $3.4 million, with rates of 5.95%–10% and maturities from FY2017 to FY2021.
- Management said available liquidity was sufficient to support operations for at least the next twelve months. The company reported no off-balance-sheet arrangements.
Unusual items, outlook and risks
- Amtech recorded a $2.6 million gain on the sale of Kingstone solar ion-implant sales and service rights and $0.7 million of equity-method income from its 15% Kingstone interest. The Kingstone transaction generated $1.7 million of Q2 tax expense; total Q2 tax provision was $1.7 million despite a pretax loss.
- Backlog was $67.3 million, up 20% year over year, including $51.3 million related to solar orders and deferred revenue. Q2 bookings were $45.0 million. Three customers represented 29%, 13%, and 11% of backlog. Orders can be canceled or delayed, and backlog is not assurance of future revenue or profit.
- Purchase obligations were $19.9 million, up from $9.8 million at September 30, 2015, largely due to increased customer orders. Tempress had contributed $1.1 million of a required $1.4 million to a four-year joint development project.
- Management gave no specific revenue or earnings forecast. It cited cyclical solar and semiconductor markets, shipment and customer-acceptance timing, dependence on a relatively small number of customers, competitive and foreign-exchange pressures, and uncertainty in realizing deferred revenue. The filing states no material changes to previously disclosed risk factors.
- The Delaware stockholder litigation related to the BTU merger was settled and dismissed with prejudice in February 2016, without admission of wrongdoing. A $325,000 fee payment by BTU, its insurers, or successors was made April 1, 2016. The filing notes potential uncertainty around any future related claims.
Most important facts to verify
- Whether backlog converts to shipments and recognized revenue, given cancellation rights, customer concentration, and acceptance-related deferrals.
- Whether the operating cash outflow and operating losses improve, and whether liquidity remains adequate without further asset-sale proceeds.
- The sustainability of results excluding Kingstone gains and equity income, and the impact of tax provisions and valuation allowances.
- Whether solar and semiconductor demand, polishing-market competition, and foreign-exchange movements affect revenue and margins.
- Debt repayment terms, the increase in purchase obligations, and progress on the Tempress development commitment.