Business context and reporting period
Amtech Systems, Inc. filed this Form 10-Q for its first quarter of fiscal 2015, the three months ended December 31, 2014. The company makes equipment and consumables for solar, semiconductor, and polishing markets. Its results are exposed to cyclical industry demand and the timing of equipment shipments and customer acceptance.
During the quarter, Amtech acquired a 51% controlling interest in SoLayTec, a supplier of atomic layer deposition systems for high-efficiency solar cells, for stated consideration of $1.9 million. The acquisition’s preliminary accounting included $5.0 million of intangible assets; valuation was not complete at quarter-end.
Financial performance and liquidity
| Metric | Q1 FY2015 | Q1 FY2014 |
|---|---|---|
| Revenue | $12.4 million | $14.8 million |
| Gross profit / margin | $3.4 million / 28% | $4.5 million / 31% |
| Operating loss | $4.8 million | $0.5 million |
| Net loss attributable to Amtech | $5.2 million | $0.8 million |
| Basic and diluted loss per share | $0.53 | $0.08 |
| Cash provided by (used in) operations | $1.9 million | $(6.9) million |
SG&A was $6.4 million, up 55%, including approximately $1.2 million of BTU acquisition-related costs. Net R&D expense rose 107% to $1.8 million, mainly because recognized government grants declined; gross R&D spending decreased. The income tax provision was $0.2 million despite the pretax loss, including effects of losses in jurisdictions with valuation allowances.
At December 31, cash and cash equivalents were $28.6 million, restricted cash was $2.6 million, and working capital was $24.7 million, down from $32.3 million at September 30, 2014. The current ratio was 1.6:1, versus 2.0:1. Amtech reported $2.0 million of debt assumed with SoLayTec, bearing rates of 5.95%–10% and maturities from fiscal 2017 to 2021. Management said available liquidity was sufficient to support operations for at least 12 months. A tax payment of approximately $5.0 million was expected in June 2015.
Operating cash flow benefited from $2.4 million of receivable collections and approximately $6.4 million of customer deposits, partly offset by operating losses and inventory purchases. Investing cash use was $0.4 million, including $0.3 million net cash paid for SoLayTec. Cash increased by $1.2 million overall.
Material changes versus the prior comparable period
- Revenue fell 16%. Solar and semiconductor equipment revenue decreased 28% to $9.0 million, primarily from lower semiconductor shipments; solar-market revenue was approximately flat at $6.7 million. Polishing supplies revenue rose 53% to $3.4 million, supported by demand for polishing templates used with sapphire substrates.
- Gross margin declined to 28% from 31%; equipment-segment margin was 25% versus 30%, while polishing-segment margin was 36% versus 37%.
- The operating loss widened to $4.8 million from $0.5 million, reflecting lower equipment gross profit and higher SG&A and net R&D expense.
- Cash from operations improved from a $6.9 million use to a $1.9 million source, principally because of collections and increased customer deposits.
- Backlog rose 107% year over year to $48.3 million; quarterly new orders were $30.0 million versus $9.8 million. Three customers represented 26%, 15%, and 15% of backlog.
Outlook, risks, contingencies, and unusual items
The filing provides no specific revenue or earnings guidance. Management cautioned that backlog may be canceled or delayed and is not assurance of future sales or profitability. Orders and revenue are sensitive to cyclical solar and semiconductor demand, customer concentration, shipment timing, and system acceptance. Deferred revenue may remain unrecognized if installation or acceptance is delayed.
Amtech completed its BTU International merger on January 30, 2015, after quarter-end, issuing approximately 3.186 million shares. The filing states that purchase accounting and pro forma combined-company results were not yet practicable to disclose and would be provided in a later filing. BTU-related shareholder litigation was subject to a January 16 memorandum of understanding to settle, contingent on formal documentation and court approval; the merger nevertheless closed.
Purchase obligations were reported at $15.0 million at December 31, 2014. Other exposures include grant-funded development commitments, foreign-exchange movements, and tax uncertainties. Foreign-currency translation produced a $1.1 million loss in other comprehensive income for the quarter. The filing reported no off-balance-sheet arrangements and no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether the elevated backlog converts to shipments, revenue, and profit, given cancellation rights and customer concentration.
- How BTU’s acquisition accounting, integration costs, and post-merger financial results affect Amtech’s leverage, cash flow, and share count.
- Whether the SoLayTec purchase-price allocation and acquired intangible-asset valuations change from preliminary estimates.
- Whether customer acceptance delays, deferred profit, or customer deposits affect future revenue recognition and liquidity.
- The timing and cash impact of the expected $5.0 million tax payment, purchase obligations, and other development commitments.
- The final resolution and terms of the BTU shareholder litigation settlement, including court approval.