Amtech Systems Inc (ASYS) 2009 Q4 法說會逐字稿

Good afternoon. Welcome to the fiscal 2009 fourth quarter and year-end results conference call. (Operator Instructions). This conference is being recorded today, November 24, 2009. I will turn the conference over to our host, Jim Byers with MKR Group. Please go ahead, sir.

Thank you, operator, and hello, everyone, and thank you for joining us this afternoon for Amtech Systems fourth 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 fourth quarter and year-end financial results. The results will be posted on our website at www.AmtechSystems.com. In addition, a phone replay will be available approximately two hours after the call's conclusion, and remaining in effect for one week. 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. 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 you will 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 technologies used by Amtech's customers and competitors, change and volatility in the demand for diffusion, PECVD and PSG removal equipment, success of our key technology vendors in delivering new products and confirming their technological advantage, the effect of changing world-wide 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, market acceptance risks, and other risk factors detailed in the Company's Securities and Exchange Commission filings, including it's Forms 10-K and Forms 10-Q. With that said, I will now turn the call over to J.S. Whang. J.S.?

Thank you. Good afternoon, everyone.Thank you for joining us today. We will review the financial rules in a moment. But first, I will review some highlights of our fiscal year, and update you on recent business development. We continued to successfully improve our solar diffusion technology and business, and execute our multi-product solar group strategy. And achieved a number of significant milestones in fiscal 2009, that position Amtech to emerging from the current down cycle as a stronger player in solar equipment market. During the year, we strengthened our market leadership in solar diffusions by further extending our global customer base, as demonstrated by recent orders from a new solar customer, and two prominent solar research institutes in Asia and Australia. We also continued to further enhance our solar diffusion processing expertise with new strategic partnership to develop next generation solar cells, that improve solar cell efficiency for our customers. This new partnerships include the PANDA project, with one of our key customers, Yingli, in China. And ECN, Energy Research Center of the Netherlands, along with the sizeable research grant we recently received from the Dutch government. With the introduction of our third solar production tool this year, we now offer three front-end process steps in the manufacturing of solar cells, that significantly extend our customer opportunities and potential available market.

From an operational perspective, we significantly improved our operational efficiency during the year, and achieved our goal of that being EBITDA positive in fiscal 2009, excluding restructuring and non-cash impairment charges. In fact on that basis, our EBITDA for the year was a positive $1.2 million. And while the economy remains challenging, we are seeing increasing signs of increased activities in the solar marketplace, including a sequential increase in total orders for the Q4, that reflect both follow-on and new customer orders. We continue to work with both existing and potential new customers, as well as of our research partners to leverage our diffusion expertise, and enhance our solar technologies. In June we announced a research collaboration with Yingli Green Energy in China, and the Energy Research Center of the Netherlands to develop and implement next generation high efficiency N-type silicon solar cells, utilizing our Tempress diffusion process method, and Tempress (inaudible) equipment at Yingli's production lines in China.

The race to higher solar cell conversion efficiency is very intense. And we believe that with the successful implementation of high efficiency cells at Yingli, we will be in a strong competitive position to offer this technology product to many customers in the solar industry in the future. In addition, recently Amtech and one of our European research partners were jointly awarded a sizeable research grant from the Dutch government to develop a process method that improves solar energy conversion efficiency rate. We believe these partnerships are additional addition of our solar diffusion expertise and high quality and reliability of diffusion and automation equipment we bring to the solar industry.

During the year, we further expanded our product portfolio with the introduction of our third solar production tool, our new technology PST dry etch system. With this product, we now provide three front-end processing steps in the manufacturing of our solar cells. They are diffusion PSG and PECVD sequential processing steps. We now offer these individually, or together as a technology turnkey system. As we actively promote our new products in the marketplace, we expect to see growing interest in both our new PSG and PECVD solar products in the coming years. While it takes a time for new product to gain market acceptance, we are very focused on leveraging our established marketing pipeline, and global customer base. This new product open new customer opportunities, and more than double the potential market we can serve, compared to only the solar diffusion market.

In regards to our semiconductor segment, we see increased activity in the marketplace, and expect 2010 to improve over 2009. Despite the difficult economy, we made a significant accomplishment this year that position Amtech to emerge from the current down cycle as a stronger player in the solar equipment market. We maintain a strong financial position, and further increased our cash balance in Q4. We continue to be optimistic about the long-term growth opportunities in the solar market, and our ability to capture debt growth as a technology turn-key multi-product supplier to the solar market and industry. I will now turn the call over to Brad to discuss our financial results. Brad?

Thank you, J.S.. I'll review some of the financial results for the fiscal 2009 fourth quarter and full year. Fourth quarter net revenue was $11.7 million, compared to $12.5 million the preceding quarter, and $26.8 million in the fourth quarter last year. Year-over-year decrease reflects significantly lower shipments to both the solar and semiconductor industries, caused by primarily by oversupply in the solar market, and the global economic downturn and credit crisis. Solar revenue for the fourth quarter was $8.9 million, compared to $10.1 million in the preceding quarter, and $17 million in the fourth quarter last year.

Total customer orders for the fourth quarter grew to $13.1 million, including $8.6 million of solar orders, more than doubling what we did in the June quarter, which was $5.3 million in total orders, which included $2.9 million in solar orders. Our total order backlog at September 30, 2009, was $32.4 million, a sequential increase from a backlog of $29.7 million at June 30th. Total backlog includes $27.9 million in solar orders at quarter-end, which is up slightly from the preceding quarter, and compares to solar backlog of $36.7 million a year ago. The effect of foreign exchange on backlog was a positive $1.2 million in the fiscal fourth quarter contributing to the increase. Backlog includes deferred revenue and customer orders that are expected to ship within the next 12 months.

For the fourth quarter ended September 30th, we recognize $300,000 of previously deferred profit, compared to a net deferral of $1.3 million of profit for the fourth quarter of September 30, 2008. Our fourth quarter gross margin was 26%, compared to 29% in the preceding quarter, and 31% in the fourth quarter a year ago. The decrease is primarily due to lower volumes resulting under utilization of existing planned capacity. Selling, general administrative expenses in the fourth quarter decreased $2.2 million or 38%, to $3.4 million, compared to $5.6 million in the fourth quarter a year ago. Decrease in SG&A primarily reflects decreased selling expense related to commissions on lower revenue. Our G&A expense decreased $786,000 in Q4, primarily due to lower provision for doubtful accounts, and lower accruals for incentive compensation, which was partially offset by an increase in our stock-based compensation expense.

Depreciation and amortization in the fourth quarter was $421,000 compared to $244,000 the prior year fourth quarter. Included in the fourth quarter of fiscal 2009 results is $206,000 of stock option expense, compared to $119,000 in the fourth quarter a year ago. As a result of the pretax loss in the fourth quarter, we recorded an income tax benefit of $320,000 in the fourth quarter of fiscal 2009, compared to a tax expense of $750,000 in the fourth quarter a year ago. Net loss for the fourth quarter of fiscal 2008 -- 2009 was $201,000 or loss of $0.02 per share, compared to net income of $1.4 million or $0.16 per diluted share for the fourth quarter of fiscal 2008. For the full 2009 fiscal year, net revenue was $53 million compared to $80.3 million in fiscal 2008. Again reflecting lower shipments to the solar semiconductor industry, partially offset by lower revenue deferrals in 2009 versus 2008.

In 2008, we deferred approximately $2.6 million in revenue, compared to essentially zero of net deferral in 2009. Solar revenue for fiscal 2009 was $34.8 million, compared to $50.1 million for fiscal 2008. Total revenue by geographic distribution in fiscal 2009 was the Asia-Pacific region at 68%, North America at 18%, and Europe at 14%. Gross margin for the year was 28%, compared to 29% in fiscal 2008. Looking at our SG&A expenses for the full year, they declined $2.9 million or 17%, for $14.8 million, compared to $17.7 million in fiscal 2008. Decrease in SG&A expenses in fiscal 2009 was due primarily to decreased selling expense related to commission on lower revenue, decreased shipping volumes, lower provision for doubtful accounts, and reduced costs related to reductions in work force mainly at our Bruce Technology semiconductor operation.

Net loss for the full year was $1.6 million or a loss of $0.18 per share, compared to net income of $2.9 million or $0.33 per diluted share for fiscal 2008. The fiscal 2009 net loss includes pretax impairment restructuring charges of $1.7 million, related to Bruce Technologies' business. We continue to maintain a solid financial position with essentially no debt and a strong cash balance. We actually increased our cash balance by $2.4 million for the preceding quarter. At September 30, 2009, our cash balance was $42.3 million, compared to $39.9 million at June 30, 2009. We had working capital of approximately $56 million, and a current ratio of four to one.

Now, turning to our outlook, we continue to have a positive outlook on the solar market, and for fiscal 2010 expect revenues to be in the range of $70 million to $80 million, a 32% to 51% increase from fiscal 2009, and fiscal 2010 first quarter revenues in the range of $12 million to $14 million. We expect gross margins and operating margin to improve in fiscal 2010, as volume increases during the year. As we continue our investment in becoming a technology turn-key provider, spending our research and development projects with key research partners and customers, is expected to increase in fiscal 2010, and which may lower the rate at which our operating margin can improve during the course of the year. It is important to remember that our operating results for future periods could be impacted by the timing of systems shipments, the net impact of revenue deferral on those shipments, the recognition of revenue based on customer acceptances, all of which can have a significant effect on operating results. So to recap, we continue to execute on our strategy of becoming a multi-product technology turn-key supplier to the solar industry. We now offer three tools critical to the manufacturing of solar cells diffusion, PSG etch, and PECVD deposition tool. We continue to maintain a strong cash position to support our growth plan. This concludes the prepared remarks section of our conference call. Operator, please open the call to questions.

Thank you, sir, we will begin the question-and-answer session. ( Operator Instructions). Our first question comes from the line of Colin Rusch with Thinkequity. Please go ahead.

HI, guys. Congratulations on bookings for the quarter. Can you help us understand the guidance for next year? Can you talk about the revenue trends throughout the year, and when you see the the bulk of the installations happening -- tools.

Well, we gave overall for the year the range of $70 million to $80 million, with the first quarter being in the $12 million to $14 million range. So that indicates there will be a ramp-up that will occur during the year. And that's really as far as the guidance that we can give. Obviously we expect bookings to run at a healthy rate to support that guidance.

And how are you getting comfortable with that guidance? I mean, is it looking at quotation activity? Or are you getting close to PO's that you just haven't announced yet?

Well -- Hi, Colin -- so when I look at the entire process of booking, and looking at the quotation activities all the way down to negotiations of performance to spec, and I'm looking at the throughout the process, we have a very healthy pipeline. And it makes me feel comfortable enough of -- for projecting a range of $70 to $80 million for next year. As a Brad indicated the Q1 to be light, I think probably second half of this fiscal year will be quite busy second half.

Okay. And can you talk about the mix between solar versus semi. And then the diffusion, the diffusion and etch for the guidance, how you think that breaks down over the next four quarters?

My expectation is over 2010. largely we will probably remain 70, 30, solar versus the semi. However, there is over -- higher quality activities from solar indicating that that mix or split, can go up to 80 for solar, so 20 for semi. And there is that potential, 70% to 80% solar, and 20% to 30% semi -- the mix is what I see.

And can you help me understand the OpEx structure? After this restructuring, are you guys in a situation where you can see a bit more operating leverage than you would have been able to in the past, as you grow revenues?

Sure, there is that possibility. As we see -- what we've -- out in the future, the order intake really depends on how quickly re-ramp up personnel again to support the manufacturing that we need to do for those orders. But there should be -- we should be able to see some additional leverage. We're going to offset a little bit of that with some increased investment in the R&D line, like I mentioned in the guidance.

Perfect. Thanks a lot guys, congratulations again.

Thanks.

Thank you. (Operator Instructions). And I'm showing--pardon me, we do have a question from the line of George Burmann with Gunn Allen Financial , please go ahead.

Looks like we're going on the right track again, yes?

Yes.

Got a quick question with the enormous amount of cash you have on the balance sheet, are you looking at possibility of acquiring maybe some competitors?

I wouldn't know -- wouldn't put it competitors. As you are aware, our growth or strategy is supported by acquisition of product, technology, or company that is highly synergistic to our core strength, and in the (inaudible). And so, we do continue to have cases at our hand that we are evaluating, and I think that's as much as I'd like to say.

Okay. And then the recently enacted government support in the United States for solar manufacturing, solar usage, do you foresee a larger percentage of sales happening in the US market versus overseas?

So as to our operations we -- our immediate above the food chain, the value chain, is solar cell manufacturing customers, not the solar module.

I understand.

Not the solar installations. So it is a great sign that the domestic market here in the US shows continued up trend for installation, and margin manufacturing news and activities to support that. But the -- I don't see near-term our business opportunity here in US greatly improving.

So when -- there is a company in California, Sun Power Corporation. They recently made some moves to have solar panels manufactured in the United States by concept manufacturing companies, like Jabil Circuits or Flextronics here in the United States to cover the US market. So they would then need to by the manufacturing equipment from you, for example, correct?

Again, we sell equipment to solar cell manufacturing customers.

Right.

Not to solar module or solar panel assembly peoples.

Okay. Okay. So that would mostly happen in the lower-wage countries of Asia then, right?

Lower wage or higher market, or technology, higher technology investment, or all of those combinations is happening in Asia.

Okay. Does the -- do currency fluctuations, US currency versus others, Euro or Yuan Renminbi, how would that influence your company?

It does have an influence. We try to manage that through what we call natural hedging. We tend to try make sure we balance our dollars and our Euros. Typically our contracts on the solar side with our customers are in Euros. And that is where we manufacture our solar products currently, predominantly in the Netherlands, within the European zones.

So you don't have any manufacturing in the US?

We have some. But it is primarily on the semiconductor side.

Okay. Okay. And how is the semiconductor end? Are you seeing some improvements there?

We're seeing some incremental improvement. There has been an uptick, no doubt in the semiconductor. And we continue to be cautiously optimistic about that side of the business.

And you intend to keep that side also? No sort of moves to maybe divest it and become a pure solar play?

That is not current until our plans. Some of our semiconductor assets are used jointly in the manufacturing of our solar products, both from a physical asset, and from a human capital asset at this point. So that's a little hard to split up.

Yes.

That way. But it also part of -- lot of our success that we have in solar, is because of our rich semiconductor experience. So that does play into the whole entire story for Amtech.

Okay. Great. Well, it looks like we have weathered the worst of storms ever, and look forward to growing with the Company.

Thank you. Appreciate it, George.

(Operator Instructions). And at this time, I'm showing no further questions. I'll turn the call back to management for any closing remarks you may have.

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

Thank you, sir. Ladies and gentlemen, this does conclude the fiscal 2009 fourth quarter and year-end results 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 and enter the access code 4186048. ACT would like to thank you for your participation, and you may now disconnect.