Amtech Systems, Inc. — Q2 FY2013 Form 10-Q
Business context and period: The filing covers the quarter and six months ended March 31, 2013. Amtech supplies thermal-processing and related equipment to solar, semiconductor, wafer and MEMS markets; it also sells wafer-polishing equipment and supplies. Results are affected by industry cyclicality and the timing of equipment shipments, installations and customer acceptance.
Financial performance
| Metric | Q2 FY2013 | Q2 FY2012 | Six months FY2013 | Six months FY2012 |
|---|---|---|---|---|
| Revenue | $8.1m | $21.6m | $17.5m | $46.3m |
| Gross profit / margin | $2.5m / 30% | $4.0m / 19% | $3.8m / 22% | $11.2m / 24% |
| Operating loss | $3.5m | $6.0m | $8.2m | $7.8m |
| Net loss | $2.6m | $5.7m | $6.9m | $7.2m |
| Net loss attributable to Amtech; loss per share | $2.1m; $0.22 | $5.1m; $0.54 | $6.3m; $0.66 | $6.0m; $0.63 |
| Cash used in operations | — | $7.8m | $12.7m |
Liquidity and balance sheet: At March 31, 2013, cash and cash equivalents were $38.8m and restricted cash was $6.7m. Working capital was $55.0m and the current ratio was 2.6:1. Total liabilities were $37.0m; the balance sheet reports no borrowings as a separate liability. Cash declined $7.9m from September 30, 2012. Capital expenditures were $0.2m; there were no financing cash flows in the first half.
Changes and operating drivers
- Quarterly and six-month revenue fell 62% year over year, primarily because of lower equipment shipments to solar and semiconductor customers. Solar revenue was $3.9m in the quarter and $8.2m for the six months, versus $10.6m and $26.2m, respectively, a year earlier.
- Quarterly gross margin improved to 30% from 19%, helped by a greater share of previously deferred revenue recognized and cost controls; lower capacity utilization partly offset the improvement. First-half gross margin decreased to 22% from 24% amid lower volume and utilization.
- SG&A and net R&D expense declined year over year, reflecting lower commissions, shipping, cost controls and reduced solar R&D activity. First-half restructuring charges were $0.7m, primarily severance from workforce reductions.
- Solar and semiconductor equipment generated $6.2m of quarterly revenue and a $3.6m operating loss. Polishing supplies and equipment generated $1.9m of revenue and $0.1m of operating income.
Outlook, risks and contingencies
- Management expected the solar industry supply-demand imbalance to continue at least through fiscal 2014 and said the semiconductor equipment market was also in a cyclical downturn. It described the order pipeline as slow.
- Backlog was $14.1m at March 31, 2013, versus $67.4m a year earlier; quarterly orders were $9.6m versus $18.0m. Backlog included $10.5m of solar orders and deferred revenue. Management cautioned that orders may be delayed or cancelled and backlog does not assure future sales or profits.
- Deferred profit declined from $10.2m at September 30, 2012 to $5.1m at March 31, 2013. Management expected lower future recognition of deferred profit than in the first half, which could pressure gross margins.
- Management believed available liquidity would support operations for at least 12 months, while noting that additional capital for its growth strategy may be needed and cannot be assured on satisfactory terms. It expected net Dutch tax payments of about $1.5m during the remainder of FY2013 and U.S. tax and interest payments of about $6.9m in FY2014.
- Purchase obligations were $7.6m. The company reported no material off-balance-sheet arrangements and said ordinary-course litigation was not expected to materially affect results or financial condition. Three customers represented 38%, 13% and 12% of accounts receivable; two customers accounted for 38% and 13% of backlog.
- Currency exposure includes foreign-currency cash and operations; a 10% currency move could affect translation adjustments by about $5.0m. Management reported no material change to previously disclosed risk factors. Disclosure controls were deemed effective.
Important facts for investors to verify
- Whether solar and semiconductor demand, new orders and backlog stabilize, and how much backlog converts to shipments and recognized revenue.
- How margins respond as deferred-profit recognition declines and low factory utilization persists.
- Cash burn, restricted-cash availability, expected tax payments/refunds and whether liquidity remains sufficient.
- Customer concentration and the collectability and timing of customer acceptance for unbilled receivables.
- Progress and funding needs for the ion-implanter program, including the impact of grants and the absence of tax benefits for related losses.