Amtech Systems, Inc. — Fiscal 2017 First-Quarter 10-Q
Reporting period: Three months ended December 31, 2016; comparisons are with the three months ended December 31, 2015. Amtech manufactures capital equipment, automation and consumables for solar, semiconductor and polishing markets.
Financial performance
| Metric | Q1 FY2017 | Q1 FY2016 |
|---|---|---|
| Revenue | $29.1 million | $22.1 million |
| Gross profit / margin | $8.4 million / 29% | $6.0 million / 27% |
| Operating loss | $0.2 million | $3.9 million |
| Net loss attributable to Amtech | $0.1 million | $4.0 million |
| Basic and diluted loss per share | $0.00 | $0.31 |
| Cash used in operating activities | $3.5 million | $10.8 million |
- Revenue increased 32%. Semiconductor revenue rose 47% to $15.7 million, solar revenue rose 20% to $11.4 million, and polishing revenue rose 10% to $2.0 million.
- Semiconductor operating income was $2.4 million, versus a $0.2 million loss a year earlier. Solar reported a $1.0 million operating loss, improved from $1.9 million; polishing operating income rose to $0.5 million from $0.2 million.
- SG&A declined to $7.0 million from $7.6 million, partly due to collection of previously reserved receivables of approximately $1.0 million. Net R&D expense was $1.6 million, down 29%.
- Cash and cash equivalents were $23.6 million at quarter-end, down from $27.7 million at September 30, 2016; restricted cash was $3.3 million, up from $0.9 million. Working capital was $45.4 million and the current ratio was 2.2:1.
- Total debt was approximately $10.1 million: $1.0 million current and $9.1 million long-term. The filing reports a $6.5 million mortgage and approximately $3.6 million of SoLayTec debt, with stated interest rates of 4.5%–12.5% on the latter.
Changes, outlook and management commentary
- Results improved substantially year over year, with higher sales and gross margin and a much smaller operating loss. Management attributed semiconductor gains mainly to higher system shipments and improved product mix; solar gross profit fell despite higher revenue, reflecting lower recognition of previously deferred profit and lower cancellation-fee revenue.
- Backlog was $51.5 million, up 20% year over year; quarterly bookings were $34.7 million versus $35.6 million. Three customers represented 20%, 17% and 12% of backlog. Orders may be delayed or canceled, and backlog does not assure future sales or profit.
- Amtech shipped its first complete PERC solution during the quarter; revenue was deferred pending customer acceptance. Management said a large n-type bifacial turnkey order received in January 2017 was expected to contribute to a significant increase in revenue in the second half of fiscal 2017.
- Following significant customer deposits received after quarter-end, cash, cash equivalents and restricted cash totaled $45.8 million on January 31, 2017. The MD&A separately states cash and cash equivalents increased by $18.5 million to $42.1 million; these figures use different cash definitions.
- Management believes available liquidity is sufficient to support operations for at least 12 months. Purchase obligations were $14.2 million, compared with $11.3 million at September 30, 2016. No off-balance-sheet arrangements were reported.
Risks, contingencies and unusual items
- Solar and semiconductor markets are cyclical; management notes persistent solar-industry supply-demand imbalance and related pricing pressure. Revenue recognition can also shift with shipment timing, installation and customer acceptance.
- Operating cash outflow included increases in receivables and restricted cash. Restricted cash rose mainly because customer deposits required cash collateral for bank guarantees.
- Foreign exchange is a material exposure: a 10% currency movement could change other comprehensive income or loss by approximately $5.0 million, and could change expected gross profit on foreign-currency sales commitments by approximately $1.6 million.
- Substantially all net deferred tax assets remain subject to valuation allowances. Long-term income taxes payable include approximately $3.9 million of unrecognized tax benefits and $2.4 million of accrued interest and penalties.
- Purchase commitments, revenue deferrals and customer concentration merit monitoring. The company’s estimated liability for the BTU-related Superfund cleanup was less than $0.1 million, supported by a $0.2 million letter of credit. The disclosed BTU merger-related stockholder litigation was settled and dismissed; management stated pending proceedings were not expected to have a material adverse effect.
- The filing identifies possible adverse effects from changes to trade agreements, including NAFTA, or international-commerce tax provisions. Management reported no material changes to previously disclosed risk factors.
Key facts for investors to verify
- Whether the January turnkey order and subsequent customer deposits convert into shipments, recognized revenue and cash collection on the expected timetable.
- Customer acceptance and revenue recognition for the PERC system and other deferred equipment; deferred profit was $3.8 million at quarter-end.
- Whether backlog converts to profitable sales, particularly given that three customers account for nearly half of backlog and orders may be canceled or delayed.
- Cash generation, receivables collectability and the impact of customer deposits, restricted cash and working-capital requirements.
- Solar-segment margins, semiconductor demand, foreign-exchange exposure, tax valuation allowances and the terms and repayment schedule of SoLayTec debt.