Amtech Systems, Inc. — Fiscal 2022 First Quarter Form 10-Q
Reporting period: Three months ended December 31, 2021; comparisons are to the three months ended December 31, 2020. Amtech manufactures semiconductor capital equipment and related consumables, reporting Semiconductor and Material and Substrate segments. Amounts below are in U.S. dollars; financial statement amounts are in millions unless noted.
Financial performance
| Metric | Q1 FY2022 | Q1 FY2021 |
|---|---|---|
| Revenue | $27.329 | $17.975 |
| Gross profit / margin | $10.764 / 39% | $7.512 / 42% |
| Operating income | $1.240 | $1.054 |
| Net income | $0.997 | $0.719 |
| Diluted earnings per share | $0.07 | $0.05 |
| Operating cash flow | $2.489 | $0.104 |
- Revenue increased 52%. Semiconductor revenue rose 52% to $23.631 million; Material and Substrate revenue rose 54% to $3.698 million. The latter increase partly reflects the 2021 acquisition of Intersurface Dynamics.
- Gross margin declined three percentage points. Semiconductor gross margin fell to 40% from 44%, reflecting a higher mix of lower-margin equipment and higher material and labor costs. Material and Substrate margin improved to 33% from 25%.
- Operating income increased 18%, while net income increased 39%. SG&A rose to $7.952 million from $5.213 million, including higher freight, commissions, acquisition costs, consulting, legal and travel expenses. RD&E increased to $1.572 million from $1.245 million.
- Cash from operations was $2.489 million; capital expenditures were $0.045 million. Operating cash flow benefited in part from increased accounts payable, accrued taxes and customer contract liabilities, while inventory and receivables used cash.
Financial position and liquidity
- At December 31, 2021, cash and cash equivalents were $32.188 million, with $0.526 million of restricted cash. Working capital was $64.5 million and the current ratio was 4.2:1, compared with 5.4:1 at September 30, 2021.
- Total debt was $4.700 million, including $0.401 million current and $4.299 million long-term; the debt bears 4.11% interest and is due in September 2023. Lease liabilities totaled $8.850 million.
- Cash and cash equivalents decreased by approximately $0.1 million during the quarter, principally because of $2.713 million in share repurchases, partly offset by operating cash generation.
- Inventory increased to $24.115 million from $22.075 million. Accounts receivable increased to $25.204 million from $22.502 million, reflecting higher and later-quarter shipments.
Changes, outlook and risks
- New orders increased 77% to $31.637 million. Backlog rose to $48.452 million from $13.799 million a year earlier, driven primarily by Semiconductor orders. Management cautions that orders may be delayed or canceled and backlog does not assure future sales or profits.
- Management expects $6–$8 million of combined research and development and capital investment to support growth, including IT systems and capacity. It expects capital expenditures to increase during fiscal 2022, but provides no specific revenue or earnings guidance in this filing.
- Management reported continued demand and strong lead generation, while noting a slower-than-expected recovery in Material and Substrate. It expects elevated material costs through at least fiscal year-end 2022 and continued labor-cost pressure; passing cost increases to customers may be constrained by pricing pressure.
- Key risks include semiconductor-industry cyclicality, COVID-related logistics and supply-chain challenges, cost inflation, customer expansion plans, and dependence on large orders. One Semiconductor customer represented 20% of quarterly revenue and one customer represented 23% of receivables. Three customers accounted for 23%, 16% and 14% of backlog.
- The April 2021 cybersecurity incident caused approximately $1.1 million of expense in fiscal 2021. The company had received approximately $0.4 million of insurance reimbursement by December 31, 2021 and another $0.2 million in January 2022; coverage discussions continued and full reimbursement is not assured.
- The quarter included repurchases of 291,383 shares for approximately $2.7 million, at an average $9.31 per share. A subsequent $5 million repurchase program was approved in February 2022. Unrecorded purchase obligations were $14.3 million. Management said available liquidity should support operations for at least the next twelve months; the filing reports no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether the sharp increase in orders and backlog converts to shipments, revenue and profitable sales, given cancellation and timing risks.
- Whether gross margins recover as material, labor and freight costs rise, and whether pricing can offset those pressures.
- Customer concentration and collections, particularly the customer representing 23% of receivables.
- Cash generation and working-capital needs as inventory is prepared for upcoming shipments, alongside planned $6–$8 million growth investment.
- Final insurance reimbursement and any additional costs or exposure related to the cybersecurity incident.
- Execution of the Material and Substrate recovery, new machine introductions and growth plans for silicon carbide applications.