Amtech Systems, Inc. — Q2 FY2021 Form 10-Q
Reporting period: Three and six months ended March 31, 2021. Amounts below are in U.S. dollars; financial statement figures are in millions unless noted. The company manufactures semiconductor equipment, wafer-polishing machinery and related consumables. Its reportable segments are Semiconductor and Material and Substrate.
Financial performance and liquidity
| Metric | Three months ended March 31 | Six months ended March 31 |
|---|---|---|
| Revenue | 2021: $19.79; 2020: $14.46 | 2021: $37.77; 2020: $35.15 |
| Gross profit / margin | 2021: $7.73 / 39%; 2020: $5.36 / 37% | 2021: $15.24 / 40%; 2020: $13.53 / 38% |
| Operating income (loss) | 2021: $0.17; 2020: $(0.97) | 2021: $1.23; 2020: $0.67 |
| Net income (loss) | 2021: $(0.25); 2020: $(11.69) | 2021: $0.47; 2020: $(13.63) |
| Diluted EPS | 2021: $(0.02); 2020: $(0.83) | 2021: $0.03; 2020: $(0.96) |
- Second-quarter revenue increased 37% year over year, led by Semiconductor revenue growth of 43%. Six-month revenue increased 7%.
- For the quarter, Semiconductor operating income was $1.67 million versus a loss of $0.02 million a year earlier; Material and Substrate recorded a $0.25 million operating loss versus $0.42 million income. Six-month segment operating income was $3.86 million for Semiconductor and a $0.32 million loss for Material and Substrate.
- For the six months, cash used in operations was $0.27 million, compared with $1.28 million provided in the prior-year period. Investing used $5.52 million, including $5.08 million net cash paid for the IDI acquisition. Cash declined $4.67 million to $40.40 million.
- At March 31, cash was $40.40 million; current assets were $76.56 million and current liabilities $10.55 million. Working capital was $66.0 million and the current ratio 7.3:1, down from 10.2:1 at September 30, 2020.
- Debt comprised $0.39 million of current maturities and $4.60 million of long-term debt. Lease liabilities totaled $6.11 million. Shareholders’ equity was $83.44 million.
Changes and significant developments
- Quarterly Semiconductor sales benefited from the return of the China factory to near-capacity beginning in fiscal Q3 2020, higher utilization and favorable product mix. For the six-month period, higher diffusion-furnace shipments drove segment growth.
- Material and Substrate six-month revenue fell 4%; segment margins were pressured by lower utilization, higher raw-material costs and inventory-obsolescence charges. Management said increased material costs were expected to continue at least through fiscal year-end, while customer pricing pressure limited its ability to pass costs on.
- Orders rose 58% year over year in the quarter and 32% for six months. March 31 backlog was $26.53 million, up 35% year over year; four customers represented 64% of backlog. Orders may be canceled or delayed and are not assurance of future sales or profit.
- Amtech acquired Intersurface Dynamics, Inc. (IDI) on March 3 for $5.25 million cash. IDI’s results are included in Material and Substrate from the acquisition date; purchase accounting was not final, and a substantial portion of the price was allocated to goodwill.
- Year-over-year net income comparisons are affected by prior-year discontinued Solar operations and disposal losses. Solar divestitures were completed in fiscal 2020; the prior-year six-month results included an $11.82 million discontinued-operations loss, including the Tempress disposal loss. R2D was also sold in December 2019.
Outlook, risks and other items
- Management described plans to pursue SiC opportunities, expand its 300mm thermal-reactor customer base, and develop products for advanced semiconductor packaging, electric vehicles and 5G. It anticipated $6–$8 million of R&D and capital-expenditure investment to support growth; this is an investment plan, not earnings or revenue guidance.
- The company expected capital expenditures to increase with the planned relocation of its Shanghai manufacturing facility after the existing lease expires in Q3 FY2021. Management said it believed available liquidity was sufficient for at least the next 12 months, while noting growth depends on access to capital and working capital.
- On April 12, 2021, after quarter-end, attackers acquired data and disabled some systems at a subsidiary. Production continued and the network was restored with enhanced controls. The investigation was ongoing; insurance coverage was confirmed, but the policy has a payout limit and total costs and potential liabilities were not yet established.
- Unrecorded purchase obligations were $11.8 million, up from $4.6 million at September 30, 2020. The company reported no material off-balance-sheet arrangements and no material changes in other legal matters; it stated that probable and estimable losses were adequately provided for.
- A new $4 million share-repurchase authorization began February 16, 2021; no shares were repurchased in the quarter. The company also cited semiconductor cyclicality, COVID-19 effects, customer concentration, cost and pricing pressures, foreign currency movements, and execution of growth plans as risks.
Key facts for investors to verify
- Whether elevated Semiconductor orders and backlog convert to shipments and revenue, given customer concentration and cancellation or delay exposure.
- Whether higher materials and obsolescence costs are passed through or continue to compress Material and Substrate margins.
- The final IDI purchase-price allocation, including goodwill and subsequent segment performance.
- The financial, operational, legal and notification consequences of the April 2021 cybersecurity incident, including insurance recovery and any costs above coverage limits.
- Cash conversion, planned R&D and capital spending, Shanghai relocation costs, and the company’s ability to maintain liquidity while supporting growth.