Amtech Systems Inc (ASYS) 2009 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, thank you for standing by. Welcome to the Amtech fiscal 2009 second quarter conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions)

This conference is being recorded Monday, May 11, 2009. I would now like to turn the conference over to Jim Byers with MKR Group. Please go ahead sir.

Thank you, Operator. Hello, everyone, and thank you for joining us this afternoon for Amtech Systems second quarter conference call. On the call today are J.S. Whang, Amtech's President and Chief Executive Officer; and Brad Anderson, Amtech's Chief Financial Officer.

After the close of market trading today, Amtech released its fiscal 2009 second quarter financial results. The release will be posted on their website at www.Amtechsystems.com. In addition, a phone replay of today's call will be available beginning approximately two hours after the call's conclusion and remaining in effect for one week. The call replay information is included in the earnings press release.

Before we begin, let me note that during today's call, management will make forward-looking statements and all such forward-looking statements are based on information available to Amtech as of this date and they assume no obligation to update any such forward-looking statements. These statements are not guarantees of future performance and actual results could differ materially from current expectations.

Among the important factors which could cause actual results to differ materially from those in the forward-looking statements are changes in the technology used by Amtech's customers, change in volatility and the demand for diffusion equipment, the effect of changing worldwide political and economic conditions on government funded solar initiatives, capital expenditures, production levels including those in Europe and Asia, the effect of overall market conditions and market acceptance risks, and other risk factors detailed in the Company's Securities and Exchange Commission filings including its Forms 10-K and Forms 10-Q. With that said, I will now turn the call over to J.S. Whang.

Thank you Jim. Good afternoon everyone. Thank you for joining us today. Our CFO, Brad, will review the financial results in a moment. But first, I will provide some highlights for the second quarter and an update on our recent business developments.

Our second quarter net revenue was $10.9 million, which reflects the significant slowdown in the solar industry as with many other industries. While we continue to see some negative impact from the current severe economic downturn, particularly on our customers' expansion plans and demand, we have not had any order cancellations of significance to date, and our marketing pipeline remains intact for the next up cycle.

We remain a positive long term outlook for growth in the solar industry and from eventual upturn in the semiconductor industry. We are encouraged that we have begun to see some signs of increased activity in both the solar and semiconductor industries, but we continue to remain cautious.

We also continue to be proactive in managing our operations. We have reduced our consolidated workforce by 22% and restructured one of our subsidiaries and continue to work towards our goal of achieving positive EBITDA in fiscal 2009 excluding the impairment and restructuring charge. We are working with both our existing and potential new customers as well as our research partners to improve our products and enhance our technologies and be a key player in helping the solar industry increase the solar cell efficiencies and drive solar costs down to (inaudible) level.

We remain focused on executing our multi-product solar growth plan and will soon introduce our new solar PSG etching product which we expect to launch within the current quarter ending June 30th. We are already in process of preparing the marketing materials and also having a technical discussion with a few targeted customers prior to July Intersolar Tradeshow in San Francisco.

With the launch of our new solar etch system, we will be providing three continuous sequential process steps in the manufacturing of solar cells. These critical process steps include our diffusion furnace, our PSG etching system, and our solar PECVD deposition system. We will be able to offer these products both individually and together as a technology turnkey product, opening new customer opportunities and more than doubling the size of the markets we can serve.

As a multi-product supplier to the industry with a strong presence in global markets, we believe we will be able to emerge from the current down cycle as a stronger player in the solar equipment market. Our financial position remains solid with essentially no debt and strong cash balance. We have built an operationally efficient organization that, given favorable product mix and volume, is capable of growing quickly, generating higher margins and delivering profit to the bottom line as we demonstrated last year.

I will now turn the call over to Brad to discuss our financial results. Brad?

Thank you, J.S. Net revenue for the second quarter of fiscal 2009 was $10.9 million compared to $17.9 million sequentially and $17.6 million in the second quarter last year. This decrease reflects lower shipments to the solar industry which were partially offset by increased shipments to the semiconductor industry in recognition of previously deferred revenue.

As we previously announced, second quarter revenue reflects the push out of approximately $3 million of shipments in the third and fourth quarters primarily due to delays in readiness of customers' facilities. To date we have not had any order cancellations of significance.

Solar revenue for the second quarter was $4.6 million, compared to $11.1 million sequentially and $11.4 million in the same quarter last year. Total revenue by geographic distribution for the six months ended March 31, 2009 was as follows. Asia Pacific area was 55%, North America was 24%, and Europe was 21%.

Total orders for the quarter ended March 31, 2009 were $5.8 million including $3 million of solar orders. Our total backlog as of March 31st was approximately $37.4 million compared to backlog of approximately $42.4 million at December 31. Total backlog includes approximately $32.6 million in solar orders at quarter end compared to solar backlog of approximately $35.8 million at December 31, 2008. The effect of foreign exchange on the backlog was $2.6 million in the second quarter and contributed to the decline in the backlog.

Gross margin in the first quarter was 22% compared to 34% in the preceding quarter and 23% in the second quarter a year ago, primarily reflecting lower shipment volumes and related reduction and efficiencies in plant utilization. As we announced in the early April press release, we have taken significant actions to reduce expenses and better align our cost structure with revenue.

During the quarter, we restructured our Bruce Technologies Semiconductor operation due to the continued slowdown in the semiconductor industry. As a result of the restructuring, we recorded approximately $600,000 in restructuring charges and $1.1 million in noncash goodwill and intangible asset impairment charges related to the second quarter. In addition, as of quarter end, we have reduced our consolidated workforce by 22% since September 30, 2008. Effective April 1st, our executive officers and outside directors have taken a reduction in salary and board meeting fees respectively.

For the second quarter ended March 31st, we recognized $0.5 million of previously deferred profit net of deferrals compared to a net deferral of $0.7 million of profit for the quarter ended March 31, 2008.

SG&A in the second quarter decreased $900,000 or 22% to $3.1 million compared to $4 million in the second quarter last year. The decrease in SG&A expense is primarily due to decreased sales commissions on lower revenue generating regions where third party sales agents are utilized.

Depreciation and amortization in the second quarter was $385,000 compared to $386,000 in the prior year second quarter. Included in the second quarter fiscal 2009 results is $167,000 of stock option expense compared to $128,000 in the second quarter a year ago. As a result of a pretax loss in the second quarter, we reported an income tax benefit of $580,000 in the second quarter of fiscal 2009 compared to a tax expense of $105,000 in the second quarter last year.

The tax benefit was lower than our historical effective tax rate due primarily to the magnitude of non-deductible expenses included in the pretax loss, the valuation allowance on state deferred tax assets, and an accrual for interest and penalties on certain tax positions. In recognition of the weakened credit and financial markets, we continue to maintain our cash and money market funds invested in short term treasuries which, while very secure, as everyone knows have carried a very, very low yield.

Net loss for the second quarter of fiscal 2009 was $2 million or a loss of $0.22 per share compared to net income of $161,000 or $0.02 per diluted share for the second quarter of fiscal 2008.

We continue to maintain a solid financial position with essentially no debt and a strong cash balance. At March 31, we had a cash balance of $37.2 million compared to $38.4 at December 31, 2008 and working capital of $55.2 million.

Turning to our outlook, while the current global economic and credit crisis has negatively impacted growth in the solar market in the near term and prolonged the downturn of the semiconductor market, Amtech continues to have a long term positive outlook on both industries. We have a strong balance sheet and cash position and plan to emerge from this down cycle even stronger with our multi-product solar offerings.

While there does appear to be some signs of increased activity in both the solar and semiconductor markets, visibility in the second half of fiscal 2009 is currently unclear as the continuing global economic downturn has caused solar cell manufacturers, Amtech's principal solar customer base, to slow or push out their solar capacity expansion plans. Despite the anticipated downturn of revenues, we expect to generate positive EBITDA, excluding impairment restructuring charges, in fiscal 2009. Operating results for future periods could be impacted by the timing of system shipments, the net impact of revenue deferral on those shipments, recognition of revenue based on customer acceptances, all of which can have a significant effect on operating results.

So just to recap what J.S. and I have talked about, we continue to execute on our strategy of becoming a multi product supplier to the solar industry. By the end of this June quarter, we will offer three tools critical to manufacturing of solar cells. Our diffusion furnace, the PSG etch system, and the PECVD deposition tool. We continue to maintain a strong cash position to support our growth plans. We have taken steps to adjust our cost structure to support our operational goal of achieving positive EBITDA in fiscal 2009 before impairment and restructuring charges. We firmly believe that we will emerge as a stronger player through this current recession. This concludes the prepared remarks of our conference call. Operator, please open the call to questions.

(Operator Instructions) Colin Rusch, ThinkEquity.

Good afternoon. Can you characterize activity that you talked about for the solar diffusion furnace demand? Where it's coming from?

The activity that was different than a few months back, which was most of the companies was under the cash preservation mode. Now I see people are more in terms of thinking about their future expansions. Although they are not writing as P.O. per se, they are much more active in fine-tuning their expansion plans and thinking that it will come soon. And also what I really like is tremendous activity in technology (inaudible) advancement efforts which is to improve solar cell efficiency. And I really like what great effort to put into that for many of our top tier customers.

Okay. That's helpful. Are any of your customers looking at upgrading electrical manufactured tools with your tools right now? Are they evaluating that possibility?

As I said, the new product that we have targeted a few customers in having this technology discussions and that aspect is being discussed. But as to spending money, as of yet, no one is really in that mode that I see.

Okay. Have you seen any interest from US manufacturers with the manufacturing tax credit? We saw today that SunTech announced that they're planning to build a facility in the US. So if you could comment on interest from US manufacturers and then also maybe give us a breakdown of the backlog by geography.

I do see activities in there. Two of our customers were inquiring about whether Amtech can assist them in establishing a USA market presence. And particularly with studying with the installation which were not in the activity as yet. And so I think the USA market is seen as a future huge growth market under the government program and many other fundamentals including our energy, the security aspect. So yes, definitely I was not surprised today's news of SunTech seeking some establishment of modular manufacturing here.

Then can you talk about the backlog by geography?

Sure, Colin. It's heavily weighted to Asia, China, and Taiwan.

Okay, fantastic. And then one last question. Can you give us an update on the acquisition strategy? Now that you've got three of the five steps you were targeting for the solar manufacturing market, can let us know where you're at in terms of getting those final two steps acquired or [leased] with potential new technologies?

Right. And we are obviously getting very close to adding third solar product and there is one more block which is a texturing product and we're continuing our efforts. And I believe once we add the texturing processing step to the three products that we're going to have by end of this quarter, will really give us unique strategy positions in what I refer to as technology turnkey product. Not the overall general turnkey, but focused on technological turnkey product combinations which really can contribute for higher efficiency to the customers that we have.

Perfect. Thanks so much, guys.

(Operator Instructions). I would now like to turn it back over to management. I show no further questions in the queue.

Thank you for joining us today. We look forward to reporting to you on our progress and we really appreciate your continued interest in Amtech. This concludes today's call.

Ladies and gentlemen, this concludes the fiscal 2009 second quarter conference call. If you would like to listen to a replay of today's conference, please dial 303-590-3030 or 1-800-406-7325, entering pass code 4068582#. ACT would like to thank you for your participation. You may now disconnect.