Amtech Systems, Inc. — Q3 FY2022 Form 10-Q
Business and period: Global manufacturer of semiconductor thermal-processing and wafer-polishing equipment, consumables and related products. This report covers the quarter and nine months ended June 30, 2022; fiscal year ends September 30. Amounts below are in U.S. dollars unless noted.
Financial performance
| Metric | Three months ended June 30, 2022 | Nine months ended June 30, 2022 |
|---|---|---|
| Revenue | $20.0 million; down 14% year over year | $74.0 million; up 22% |
| Gross profit / margin | $5.9 million / 30%, versus $10.1 million / 44% | $27.0 million / 36%, versus $25.3 million / 42% |
| Operating income | $9.6 million, including a $12.5 million property-sale gain | $13.4 million, including the same $12.5 million gain |
| Net income / diluted EPS | $10.2 million / $0.73 | $13.2 million / $0.93 |
The property-sale gain exceeded reported operating income for the quarter; excluding that gain, operating results were a loss. Semiconductor revenue fell 22% in the quarter, primarily reflecting the Shanghai facility shutdown, while Material and Substrate revenue rose 34%. For the nine months, Semiconductor revenue increased 18% and Material and Substrate revenue increased 44%.
Cash flow, nine months: Operating activities provided $5.1 million, compared with $2.8 million used in the prior-year period. Investing activities provided $19.6 million, mainly from the Billerica property sale; financing activities used $8.9 million, including debt payments and stock repurchases. Ending cash, cash equivalents and restricted cash totaled $48.2 million.
Liquidity and debt: At June 30, cash and cash equivalents were $47.7 million, restricted cash was $0.5 million, and working capital was $77.0 million. The current ratio was 4.3x, compared with 5.4x at September 30, 2021. The balance sheet reports $0.3 million of current and long-term debt, while the debt note says debt was paid in full on June 23; investors should verify the reported balances and timing. Lease liabilities totaled $11.3 million.
Material changes, outlook and risks
- Shanghai disruption: A government-mandated shutdown began March 28, 2022. The facility partially reopened in May and fully reopened June 1, operating near full capacity for the remainder of June. Management estimates at least two quarters will be needed to recover missed shipments; further shutdowns remain possible.
- Sale-leaseback: BTU sold its Billerica, Massachusetts property for $20.6 million and entered a two-year leaseback at annual base rent of $1.5 million. The transaction generated a $12.5 million pretax gain and approximately $14.9 million net cash inflow after debt repayment and sale expenses. Management plans to search for a replacement manufacturing facility during the leaseback.
- Demand and backlog: Nine-month orders increased 18% to $95.5 million. Backlog was $62.7 million at June 30, up 83% year over year. Orders may be delayed or canceled, so backlog is not assurance of future sales or profits; four Semiconductor customers each represented 12%–19% of backlog.
- Costs and margins: Management reported higher material and labor costs, customer pricing pressure, and increased freight expense. It expected material-cost increases to continue at least through fiscal 2022 and said it was reviewing pricing and supplier arrangements.
- Other risks and commitments: Unrecorded purchase obligations were $24.4 million, up from $17.0 million at September 30, 2021, largely reflecting inventory and long-lead-time purchases. The filing reports no material off-balance-sheet arrangements. It provides no specific revenue or earnings guidance.
- Prior-period correction: The company revised previously reported interim 2022 revenue, gross profit and SG&A to reclassify distributor sales discounts. For the six months ended March 31, 2022, revenue and gross profit were each reduced by $1.9 million and SG&A by the same amount; the correction did not affect operating or net income.
- Cybersecurity: A 2021 incident exposed certain employee and beneficiary personal information, with no indication of misuse. The company reported a final insurance reimbursement of approximately $0.6 million and may make further security investments.
Important facts for investors to verify
- How quickly Shanghai production and delayed shipments recover, and whether further operating restrictions occur.
- Underlying profitability and margin trends apart from the one-time property-sale gain.
- Conversion of the elevated backlog into shipments, revenue and cash, including customer concentration and cancellation risk.
- The reported debt balance versus the note stating debt was repaid, and the company’s leaseback and replacement-facility plans.
- Whether higher input, freight and labor costs can be passed through to customers without further margin erosion.