Business context and reporting period
Amtech Systems, Inc. filed this unaudited Form 10-Q for the quarter ended December 31, 2019, the first quarter of fiscal 2020. The company makes semiconductor thermal-processing equipment and SiC/LED polishing equipment and consumables. Following its decision to exit solar, solar operations are presented as discontinued operations; R2D Automation was sold during the quarter.
Financial performance and liquidity
Amounts are in U.S. dollars; financial statement figures below are in millions except per-share data.
| Metric | Q1 FY2020 | Q1 FY2019 |
|---|---|---|
| Revenue from continuing operations | $20.7 | $23.2 |
| Gross profit / margin | $8.2 / 39.5% | $9.0 / 38.8% |
| Operating income | $1.6 | $0.7 |
| Continuing-operations net income (loss) | $(1.3) | $0.2 |
| Discontinued-operations net loss | $(0.7) | $(2.6) |
| Net loss / diluted loss per share | $(1.9) / $(0.14) | $(2.4) / $(0.16) |
| Cash used in operating activities | $(0.2) | $(0.6) |
- Continuing-operation revenue fell 11% year over year. Semiconductor revenue declined 9%, mainly on lower diffusion furnace sales; SiC/LED revenue declined 6% amid a soft market and cautious customers.
- Operating income included a $2.8 million loss on the R2D sale. Excluding this item, pre-tax results would have been materially stronger; the filing reports no adjusted measure.
- Cash, cash equivalents and restricted cash were $59.9 million at quarter-end, including amounts classified within held-for-sale assets. Balance-sheet cash and equivalents were $52.7 million. Working capital was $79.5 million; the current ratio was 4.2:1, or 9.1:1 excluding held-for-sale balances.
- Continuing-operation debt was approximately $5.5 million, including current maturities; held-for-sale liabilities separately included $0.3 million of long-term debt. Total assets were $122.3 million and shareholders’ equity was $89.0 million.
Material changes, outlook, risks and unusual items
- Backlog fell 38% to $13.4 million year over year; new orders declined 11% to $17.6 million. Management cautions that backlog may be delayed or canceled and does not assure future sales or profit.
- Management’s growth priorities include SiC opportunities, its 300 mm silicon horizontal thermal reactor, and BTU product innovation. It projected $6–$8 million of research and development and capital expenditures to support growth, plus potential spending on IT and capacity. It said available liquidity should support operations for at least 12 months; no specific revenue or earnings guidance was provided.
- On January 22, 2020, after quarter-end, Amtech sold Tempress for nominal consideration and provided it a $2.25 million unsecured working-capital loan; $0.5 million had been repaid by the filing date. Amtech expected a pre-tax deconsolidation loss of approximately $12.5–$13.0 million, including $7.3 million of accumulated currency translation losses, and a significant tax benefit. It did not expect the loss to materially affect continuing-operation cash balances.
- The company identified the coronavirus outbreak as a risk because it has operations, customers and suppliers in China. It modified operating hours in late January and could not estimate the duration or financial impact, which could materially affect the Semiconductor segment and fiscal Q2 results.
- Other exposures include arbitration threatened by a customer following termination of a solar turnkey contract, $4.5 million in unrecorded purchase obligations, and approximately $1.3 million of unrecognized tax benefits plus $0.8 million accrued for related interest and penalties. Management reported no material off-balance-sheet arrangements.
- Amtech adopted the new lease standard in October 2019. It said a new SiC/LED building lease was expected to add about $5.0 million in right-of-use assets and lease liabilities in Q2.
Important facts for investors to verify
- Whether new orders and backlog stabilize or recover, particularly in Semiconductor and SiC/LED.
- The realized cash recovery and ultimate accounting and tax effects of the Tempress sale and loan.
- The duration and operational and financial effects of the coronavirus-related disruption in China.
- Cash available to continuing operations after separating cash held within the solar disposal group, and funding needs for planned investment.
- Progress or resolution of the threatened solar-contract arbitration and the status of tax valuation allowances.