Amtech Systems, Inc. — Form 10-Q Summary
Reporting period: First quarter of fiscal 2016, three months ended December 31, 2015. Amtech manufactures capital equipment, automation, parts and consumables for solar, semiconductor and polishing markets. Comparisons are with the three months ended December 31, 2014 unless noted.
Financial results and liquidity
| Metric | Q1 FY2016 | Q1 FY2015 |
|---|---|---|
| Revenue | $22.1 million | $12.4 million |
| Gross profit / margin | $6.0 million / 27% | $3.4 million / 28% |
| Operating loss | $3.9 million | $4.8 million |
| Net loss attributable to Amtech | $4.0 million; $0.31 per share | $5.2 million; $0.53 per share |
| Operating cash flow | $(10.8) million | $1.9 million |
| Capital expenditures | $0.1 million | $0.2 million |
- Revenue rose 78%; semiconductor revenue increased substantially following the BTU acquisition, while solar revenue rose 15% and polishing revenue fell 46%.
- Gross margin edged down one percentage point. Solar and polishing gross profit declined; semiconductor gross profit increased with BTU. Previously deferred profit recognized was $0.6 million versus $1.3 million.
- SG&A was $7.6 million, up from $6.4 million; net research and development expense was $2.3 million, up from $1.8 million. The operating loss narrowed despite these higher expenses.
- Cash and cash equivalents were $22.6 million at December 31, down from $25.9 million at September 30, 2015. Working capital was $45.9 million; the current ratio was 2.5:1.
- Operating cash use reflected operating losses and substantial payments of accounts payable and accrued liabilities. Cash was partly supported by $7.0 million in proceeds from the partial sale of Kingstone and $0.7 million in net borrowings.
- Total debt was approximately $10.1 million, including $0.8 million current maturities. Total liabilities were $45.4 million. Restricted cash was $0.8 million.
Material changes, outlook and risks
- BTU, acquired in January 2015, contributed to the sharp increase in semiconductor revenue. SoLayTec, acquired in December 2014, is included in solar results. In September 2015, Amtech sold part of its Kingstone stake and retained a 15% interest in the Hong Kong holding company, equivalent to an approximately 10% beneficial interest in the Shanghai operating entity.
- Backlog was $42.9 million, down from $48.3 million a year earlier; new quarterly orders were $35.6 million versus $30.0 million. Solar orders accounted for $23.0 million of current-quarter orders. One customer represented 44% of backlog, and one customer accounted for 14% of quarterly revenue. Backlog may be delayed or canceled and does not assure future sales or profit.
- Management stated that cash resources were expected to support operations for at least the next 12 months. The filing provides no specific revenue or earnings guidance. Management cautioned that results are affected by cyclical solar and semiconductor markets, shipment timing and customer acceptance.
- The company was not in compliance at quarter-end with a covenant on the BTU mortgage requiring outstanding principal, accrued interest and fees to remain below 80% of the mortgaged property’s appraised value. It had received neither an acceleration notice nor a waiver as of the filing; $0.1 million was reclassified to current liabilities.
- Risks include ongoing operating losses and cash consumption, the solar industry’s supply-demand imbalance, foreign-exchange exposure, and customer delays in installation or acceptance that can postpone revenue and cash collection. The company reported no material change to previously disclosed risk factors.
- A proposed settlement of BTU merger-related shareholder litigation remained subject to court approval. The company warned that litigation could cause costs and distract management. Purchase obligations were $7.2 million. The company also had a less-than-$0.1 million estimated Superfund cleanup liability.
- Deferred-tax valuation allowances increased by $0.7 million during the quarter, primarily due to losses in the Netherlands and China. The company reported effective disclosure controls and no material changes in internal control over financial reporting.
Important facts for investors to verify
- Whether the BTU mortgage covenant breach is waived, cured or otherwise leads to lender action, and whether the property valuation supports compliance.
- Whether operating cash use moderates and liquidity remains adequate, particularly given continued losses and working-capital movements.
- Whether backlog converts to shipments and recognized revenue, including the impact of the customer representing 44% of backlog and acceptance-related deferrals.
- Whether semiconductor growth from BTU offsets weakness in polishing and continuing challenges in solar, and how segment margins develop.
- The court’s decision on the proposed settlement of the BTU shareholder litigation and any resulting costs or obligations.