Amtech Systems, Inc. — Q3 Fiscal 2020 Form 10-Q
Reporting period: Three and nine months ended June 30, 2020; fiscal year ends September 30. The company manufactures semiconductor thermal-processing equipment and SiC/LED polishing equipment and consumables. Results reflect continuing operations after the divestitures of its solar businesses and automation division.
Financial performance and position
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $15.2 million | $21.0 million | $50.4 million | $64.9 million |
| Gross profit / margin | $6.0 million / 39% | $7.9 million / 37% | $19.5 million / 39% | $24.8 million / 38% |
| Operating income | $31,000 | $1.4 million | $696,000 | $3.3 million |
| Continuing-operations net income (loss) | $(72,000) | $893,000 | $(1.9) million | $2.2 million |
| Net income (loss), including discontinued operations | $(72,000) | $2.0 million | $(13.7) million | $(6.0) million |
| Basic and diluted EPS | $(0.01) | $0.14 | $(0.96) | $(0.42) |
- Cash flow: For the nine months, operating cash flow was $(1.0) million, investing cash flow $(10.8) million, and financing cash flow $(1.5) million. Cash and cash equivalents were $46.4 million at June 30, down from $53.0 million at September 30, 2019. The cash-flow statement’s beginning and ending totals include restricted cash and cash associated with businesses held for sale in earlier periods.
- Liquidity and debt: Working capital was $70.8 million and the current ratio was 8.2:1. Long-term debt, including current maturities, was approximately $5.3 million. The balance sheet also reported $5.2 million in lease liabilities, largely related to a new SiC/LED facility lease.
- Balance sheet: Total assets were $104.1 million and shareholders’ equity was $82.3 million at June 30, 2020.
Changes versus comparable periods
- Q3 revenue declined 28% year over year; nine-month revenue declined 22%. Semiconductor revenue fell 24% in Q3 and 19% for the nine-month period. SiC/LED revenue fell 7% and 13%, respectively.
- Q3 gross margin improved to 39% from 37%, despite lower sales; management attributed this mainly to product mix. Nine-month margin rose to 39% from 38%.
- Operating income fell sharply. Q3 SG&A declined, but research and development expense increased, and revenue contraction reduced operating leverage.
- Nine-month net loss includes a $10.9 million pre-tax loss on the Tempress sale in discontinued operations, including $7.2 million of previously accumulated currency translation losses, and a $2.8 million loss on the R2D automation sale. Tempress also received a significant tax benefit related to the disposal.
- Backlog at June 30 was $15.2 million, down 10% year over year. Q3 new orders were $10.8 million, down 31%; nine-month orders were $49.1 million, down 9%. One semiconductor customer represented 19% of backlog.
Outlook, commentary, and risks
- Management said COVID-19 and economic uncertainty had reduced customer activity and disrupted U.S. operations; China production had returned to near capacity. It anticipated continuing volatility in orders and shipments and characterized the pandemic’s negative impact as expected to be temporary, while noting its duration and effects remained uncertain.
- The company said its cash and balance sheet were sufficient to support operations for at least the next 12 months. It did not use the PPP loan program and was pursuing other relief measures, including tax-related options.
- Growth priorities include SiC capacity and product development, 300 mm silicon thermal-processing systems, and BTU product innovation. Planned R&D and capital expenditure investment was estimated at $6–$8 million; some projects could be deferred due to COVID-19. Management also expected higher capital spending in Q4 as it completed the SiC/LED relocation.
- Key risks include the pandemic and possible resurgences, supply-chain and manufacturing disruption, cyclical semiconductor demand, U.S.–China trade tensions, customer order cancellations or delays, and execution of growth and acquisition plans. Backlog is not assured revenue.
- Other items: the company repurchased 366,000 shares for $2.0 million in the March quarter under a new $4 million authorization; there were no repurchases in Q3. It reported $4.8 million in unrecorded purchase obligations and no material off-balance-sheet arrangements. Management reported disclosure controls were effective.
Important facts for investors to verify
- Whether subsequent orders, shipments, and customer demand recover from the year-over-year declines, particularly in the Semiconductor segment.
- Whether the $15.2 million backlog converts to revenue on schedule, given customer cancellation and delay rights and the 19% customer concentration.
- Actual operating cash generation and cash needs after divestiture-related outflows, planned investment, and the SiC/LED facility lease.
- The full effects of COVID-19, trade tensions, and supply-chain conditions on U.S. operations, production, and growth initiatives.
- Final tax treatment and cash collection related to the Tempress disposal and loan: the filing states a $2.25 million loan, a $0.5 million forgiveness, and a $1.25 million final payment received in July 2020.