Amtech Systems Inc (ASYS) 2011 Q2 法說會逐字稿

Welcome to the Amtech Systems second quarter fiscal 2011 financial results 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).

The conference is being recorded today, Tuesday, May 10, 2011. I would now like to turn the conference over to Jim Byers at MKR Group. Please go ahead, sir.

Thank you, Operator. Hello, everyone, and thank you for joining us this afternoon for Amtech Systems' second conference call. On the call today are J.S. Whang, Amtech's Chief Executive Officer; and Brian Anderson, Amtech's Chief Financial Officer. After the close of market trading today, Amtech released its second quarter fiscal 2011 financial results. The results will be posted on the website at www.Amtechsystems.com, and in addition, a phone replay of today's call will be available beginning approximately 1 hour after the call's conclusion and remaining in effect for 1 week. The call replay information is included in the earnings press release.

Before we begin, let me note 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 results could differ materially from current expectations. Among the important factors that 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 in volatility in the demand for its product, the effective changing worldwide political and economic conditions on government-funded solar initiatives, capital expenditures, production levels, including those in Europe and Asia, the effective overall market conditions, including the equity and credit markets and market acceptance risk, and other risk factors detailed in the Company's Securities and Exchange Commission filing, including its Form 10-K and Form 10-Q. With that said, I will now turn the call over to Mr. J.S. Whang.

Good afternoon, everyone, and thank you for joining us this afternoon. We are very pleased to report another strong quarter, including record revenue, profit, and backlog. Our second quarter revenue of $61 million is up 14% sequentially and up 281% year-over-year. As a benchmark of our top line growth, our total revenue for the first 6 months of this fiscal year nearly equals our total revenue for all of fiscal 2010, and we enter our third quarter with record backlog of $195 million, which is up 13% from record backlog in the preceding quarter. These record results further demonstrate our technology leadership in high-efficiency solar-efficient N-type power, operational capability to profitably manage [and service] in this high-growth market.

The strong order momentum we have generated for our solar-efficient technology in the first 6 months of fiscal 2011 reflects our continued success in expanding business with our existing customers and in attracting new top-tier customers. And, we continue to aggressively pursue additional market share as the leader in the high-efficiency solar cell, which is our core competency. As a part of our Solar Group strategy, we are very focused on leveraging our implant success and expertise to further improve and grow our solar capabilities and expand the markets we serve.

During the quarter, we acquired a controlling interest in a China-based implant technology company, demonstrating our commitment to technology leadership in meeting the future demands for higher solar-cell efficiency. With this acquisition, we immediately established a technology beachhead in a strategically key part of the world, increased our technology expertise, and created a strong foundation for future opportunities for our solar business. While still very preliminary, our solar ion implant development efforts show promise.

As we continue to successfully transform Amtech into a solar technology leader, we are positioning ourselves for continued strong growth as the solar market moves toward higher-than-20% cell conversion efficiencies at lowest cost of ownership. To update on our proprietary technology for producing high-efficiency N-type solar cells, we continue to make progress, selectively promoting N-type among key solar customers, and we may see some N-type orders this calendar year, with a more meaningful ramp in sales in calendar 2012.

As a part of our increasing focus on technology, we announced two key appointments last month. Dr. James Hwang, who has served on our Board, was named our Chief Technology officer. He has assumed responsibility for our key technology initiatives and execution of our strategies to further expand and enhance our solar product offerings. We also appointed Dr. SooKap Hahn to our Board of Directors and our Development Strategy Committee. He brings more than 30 years of semiconductor experience, further strengthening our technology expertise. We are also pleased to see growth in our LED and polishing consumable tools, manufacturers of sapphire and silicon carbide wafers used in the LED market. While these revenues are small related to our consolidated revenues, they provide us a base for formulating our growth strategy in this fast-growing energy market.

We remain focused on successful execution of our solar growth strategy and remain optimistic about the long-term growth of this solar market. Just last week, according to reports, the Chinese government announced a significant increase in its targets for solar installations, doubling the 2015 target to 10 GW, and the 2020 target reaching an impressive 50 GW. While our older pipeline has slowed reasonably, the value of our older pipeline remains healthy. Recently, another equipment company announced lower revenue guidance due to the push-out of an order from a solar customer. We believe our backlog, as it stands today, is solid, and based on the strength of our record backlog, and the successful ramp-up of our operations, we have not only maintained, but increased our full-year revenue guidance for fiscal 2011, as we remain on track to continue to produce and ship at a high volume in the June and September quarters. I will now turn the call over to our CFO, Brad, to discuss our fiscal financial results. Brad?

Thank you, J.S. We are very pleased to report just another outstanding quarter any way you look at it. Second quarter net revenue was a record $61.3 million, up 14% sequentially from the preceding quarter's record revenue, and up 281% from the second quarter last year. Again, driven primarily by higher system shipments customers in the solar industry. Quarterly bookings in the second quarter were $73 million, including $60 million in solar orders, compared to $34 million, including $28 million solar a year ago. At quarter-end, our bookings for the fiscal year-to-date were $210 million, including $189 million in solar orders.

We entered the June quarter with a record backlog of $195 million, which includes $180 million in solar orders. Just as a reminder, our backlog includes deferred revenue and customer orders that are expected to ship within the next 12 months. This backlog provides us with excellent visibility into the next couple quarters. Second quarter gross margin improved to 40%, compared to gross margin of 36% in the preceding quarter, and 29% in the second of fiscal 2010. The increase in gross margin is primarily attributable to more efficient capacity utilization from higher shipment volumes.

Our SG&A expenses in the second were $11.2 million, or 18% of revenue, compared to $10.4 million, or 19% of revenue, in the preceding quarter. SG&A expense reflects increased commissions on higher revenues and commission rates, and higher legal and consulting fees primarily related to our China acquisition activity and higher incentive compensation expense. Depreciation and amortization in the second quarter was $575,000 compared to $420,000 in the prior-year's second quarter. Included in the second fiscal 2011 results is $369,000 of stock option expense, compared to $193,000 in the second quarter a year ago. Income taxes in the second quarter were $5.1 million, reflecting an effective tax rate of approximately 40%. This compares to a 40% effective tax rate in the preceding quarter. We continue to make progress reorganizing our legal structure to achieve greater cost efficiencies that will also lower our tax rate, and we expect to see those benefits starting in fiscal 2012.

Net income for the second quarter of fiscal 2011 was a record $7.5 million, or $0.77 per diluted share, compared to net income of $5 million, or $0.52 per diluted share in the preceding quarter, and net income of $206,000 or $0.02 per share in the second quarter last year. Total revenue by geographic region for the fiscal second quarter was, in the Asia-Pacific region, 86%, Europe at 8%, and North America at 6%.

Now, turning to our outlook. We are increasing our guidance for fiscal 2011 full-year revenues to surpass $240 million, up from our previous guidance of $230 million, which represents a 100% increase from our fiscal 2010 revenues. We expect fiscal 2011 third quarter revenues to be in the range of $63 million to $66 million. Our operating margins in the June quarter compared to the March quarter could be negatively impacted by higher revenue deferral due to expected continued ramp-up of shipments, expected higher material costs, an increased research and development cost relating to our solar ion implant project and other key solar projects.

So, let me recap. We've had an outstanding quarter with record revenue, record profits, record backlog. With almost $200 million in backlog we have excellent visibility into the next couple of quarters, and we remain on track to produce and ship at a high volume in the June and September quarters. We are increasing our investment in technology today to support our customers' higher solar cell efficiency road maps we have made progress in expanding our N-type technology to other solar customers, and we continue to make excellent progress in penetrating the LED market with our polishing consumables, which provides a base for formulating our growth strategy in this fast-growing market.

This concludes the prepared remarks section of our conference call. Operator, please open the call to questions.

(Operator Instructions).

Colin Rusch, with Thinkequity.

Congratulations. Can you talk about how you're getting comfort on the backlog over the next 6 months, and why you're not expecting any push-out when some of your competitors are?

Colin, this is Brad. Of course, we've been looking at our backlog and looking at our customer base. I think one thing to look at is the quality of customer that we have is excellent, and we continue to work with them closely on their future needs. In addition, with the backlog that we have, we still feel very comfortable, obviously, with the guidance that we've given to actually increase it for the year, full year, fiscal year and for this next quarter.

Great. Your liabilities, your current liabilities have actually increased pretty substantially quarter-over-quarter -- or I'm sorry, in the last couple of quarters. Can you break that out in a little more detail. What's all included in that $88.6 million?

Well, we have, of course, our customer deposits have been used to help us with our working capital needs. We've been very effective in that regard. So, I consider that to be a positive, which really helps us on the collections side of things with our accounts receivable. If you look at our DSO or accounts receivable, they're pretty healthy for a cap equipment Company. So, that's part of it. You'll see obviously our deferred profit has increased since last year-end. Again, that's just due to the heavy volume and increase in shipments, and I think those are the major ones. Of course, accounts payable from time to time, that just depends on where you're at in your cutoff in the quarter.

Perfect, and then can you talk about the retrofit opportunity? Obviously, there's a meaningful installed base in manufacturing capacity for the solar industry, but what we suspect is happening is that a number of lines are needed to be upgraded to a higher-efficiency process in technology, and clearly you guys are one of the leaders in providing those sorts of processes. Can you talk about how many companies you're talking to about upgrading lines and working on process improvement across their existing asset base?

Hi, Colin, J.S. The customers who are planning for replacement of an old production line with a more efficient product to improve their productivity as well as their efficiency. We haven't really closed a deal on that replacement business as yet, and, however, as the market perhaps slows, maybe 2 things can happen. Number 1 is a technology buy, as we've seen in the semiconductor experience as well as the customer upgrading their existing line. We are following customers very closely in lieu of some slowdown, but by and large, every customer is in extension mode, only speed of extension has slowed. But, I believe all the winners in the industry is continuing to execute their growth plan.

Perfect. And, just one final one for me, and I appreciate you letting me ask all the questions. Can you give us an update on the PSD and PCVD product development, and when we might start to see some revenue from those?

So, while we have clearly met our benchmark of developing the product, and we felt that our performance of similarly-performing other equipment in the marketplace wasn't going to be enough for penetrating the market in any meaningful way. And, as I shared this previously, and we are continuing to perfecting further refinement of our process and improving the performance of our PCVD and PSD so that we can offer differentiation from existing product in the marketplace. And, it may take time, but we feel it's worth differentiating our equipment from product in the marketplace rather than trying to compete as a me too, product.

Great. Thanks a lot, guys.

Bill Ong, Merriman Capital.

Congratulations, another solid quarter. When you look at your backlog measured in revenue months, it's running about 9.5 to 10 months versus a couple quarters back, running about 5 to 6 months. So, have your lead times increased, and if so, does that put risk in double orders or push-outs?

Hi, Bill. It's Brad. I think, if you look at our backlog and the guidance we gave, I can see how you can come to those numbers. We felt like the guidance we gave is reasonable and prudent considering the current market situation. Also, I'd say our ship times book-to-ship dates, probably haven't changed that much over the last several months.

Okay. And, then my next question is on Trina Solar recently announced a research partnership with Australian University to work on N-type technology. I want to see if Amtech is involved in this project, and if not, how is the technology different from yours?

Hi, Bill, J.S. The N-type of technology is very attractive to most customers, if not every customer. So there are many customers working on their own N-type. However, we have not seen any nearly-as-good successful completion of N-type by other customers in the marketplace, and this is an important high-efficiency technology for us, and so we follow very closely. And I believe our diffusion process is the only production-worthy process-perfecting product in the marketplace. And, in fact, some of our customers claiming they have developed their own N-type technology are actually coming to us, and trying to secure our diffusion technology, as well as equipment.

That's helpful. And, then, my last question is to Brad. Help us out on tax rate going forward as well as on gross margin view over the next couple quarters out?

Yes. I mentioned in the prepared remarks, from a tax standpoint, our tax rate, we expect to see it start to decline fiscal 2012 for the next couple of quarters. I wouldn't expect it to change much from what we have experienced in the first 2 quarters.

So, just keep it at 40%, high-30%?

Well, I'll never tell you how to keep it. I'll tell you what our viewpoint is, but just stay pretty consistent through the end of this fiscal year.

Okay. Thank you, and nice job, once again, gentlemen.

Jeff Osbourne, Stifel Nicholas.

Congratulations on the strong results in backlog. Just a couple of questions. Most of them have been asked. Could you just remind us on what the terms of the down payment that you're receiving are? Are you seeing any of that change at all as people place their orders this quarter?

As far as how it typically works, a deposit is anywhere, probably 10%, 15% for deposit. Then, that is applied against the receivable, when shipment and acceptance of the tool occurs. It's pretty straightforward from a deposit standpoint. As far as trends changing on that? I wouldn't necessarily see much of any trends changing. Our increase in volume shows that our deposits have gone from $9 million at the end of our fiscal year last year to $23 million at the end of March. So it's still a very healthy rate of deposits from our customer base.

I understand. And, just a couple other quick ones for you. You mentioned the R& D spending pick-up, and it makes sense to invest in the Company here, especially given the ion implants development. Any sense on what the run rates for R&D should be on an average quarterly basis next fiscal year?

We haven't spelled that out specifically. I think, if you look at the details of the transaction, which we have disclosed in our 10-Q this quarter, the quarter in which we did the acquisition, you can see that there's a pretty healthy amount that's going to be spent over the next probably 18, 24 months in that development program. But, really not broken out on a quarterly basis. There's -- as J.S. mentioned in his prepared remarks, we continue to make progress, and we're working very hard in putting a lot of resources to that. Typically those ramp up and are heavy in the early part of the development. So that's what we would expect with this program.

You mentioned, in the Asia revenue, more interested in the orders this quarter. Are you seeing any de-emphasis in China itself in more of a presence from say, Korea, India, or perhaps Taiwan?

Yes. I wouldn't say that there's been much of a regional shift. Maybe that will come in the future. But still, pretty heavy with China and Taiwan.

Hi, Jeff. This is J.S. Obviously, the Korea, Taiwan, as well as Japan, having a tremendous technology base and continues to intently working on how to differentiate from their Chinese competitors. And, I think time will tell whether on that will happen and they will be successful at doing that. Right now, if we look at the landscape now, I believe remaining this year, China will continue to dominate, so as will Taiwan, but in the 2 or 3 years, that could change. You can't really rule out all this [Inaudible] technology base in China, Japan, and Taiwan.

Thanks. Maybe one last quick one, if I can sneak it in. You mentioned the high-quality customer base, Brad, which I agree with, but any thoughts on perhaps detailing the top 15 cell manufacturers in 2010? Do they make up 75% of the mix? That seems to be what some of the weakness pending that your competitors have highlighted with the Tier 2 and 3 customers.

Yes. To characterize it, definitely a large percentage, I'm not sure I'd say exactly 75% or even more is really Tier 1 customers for us.

Jeff, in addition what Brad said, we believe that our customer base is not only mostly top tiers, but also the technology is more stable. That's the way I see it. And, when they have a high-efficiency technology and the technology works or anything that they are working on, they continue pursuing, I don't see our customer having difficulty and/or lagging behind their technology pursuit. So, I think it's a more stable operating condition than perhaps others that gives also the characteristic of maybe higher quality or better customer base.

Makes sense. Thanks for all the detailed answers, and I appreciate the detail on the LED space. Look forward to tracking your progress there.

Edwin Mok, Needham & Co

First I have a question on your N-type product, and what you see your customer doing. One of the top Taiwan cell maker has said that licenses are dropping, and as a result you're moving some of their capacity to develop high-efficiency product. I was wondering, have you guys started seeing that from some of your customer base, and to tie to that question, I think predominantly you guys have been selling to [Inaudible]. I was wondering what progress you've made with auto customers that led you to believe that you can have a meaningful ramp in [Inaudible].

As we indicated in our prepared remarks, we are selectively and actively engaged with our hands full of customers, and they all are very positively reviewing our entire technologies, particularly with the diffusion being nearly perfected for production-worthy operations. And so, as I said, we will see some initial orders this calendar year with the validation of performance, and we expect to see meaningful sales ramp-up in the next year. Our arrangement with the one customer in China, the exclusivity will end September 30 this year. So, from October, we will be a lot more open and aggressive marketing our N-type technology.

Can you clarify [Inaudible] can you talk to your customers, such as [Trainer], about this technology and maybe do some demonstration at your lab? Is it just preventing you from shipping to that customer, or are you completely prevented from even talking to these customers?

Other customers in China we are selectively and carefully approaching because of the exclusivity arrangements with the existing N-type customer in China.

Great. Very helpful. The second question I have is on your orders outlook, you said basically, on the proprietary markets from the press release, it sounds like you guys expect order to be lower in the coming quarter? Is that the right way of thinking about it, am I reading too much into it? And, does that just come from customers digesting the big orders that you guys have received over the last 2 quarters?

I think that's a reasonable look at it. While the volume of the pipeline continues to be healthy, the speed of which orders coming out of there has slowed. So, I think the way you characterized it is fairly reasonable.

Great. Very helpful there. You mentioned on your backlog there's a portion that is deferred revenue. Obviously, those come with very, very good margins because they defer revenue. So, I was wondering how much of that is deferred revenue, when do you expect to recognize that, or what is the timing of those revenues?

Right. If you look at, in most of the financial statements, [Inaudible] every quarter, we put in what the cumulative amount is, the deferred revenue less deferred cost to get you to a deferred profit that shows up on the balance sheet and liability section. But, we have about $22 million to $23 million of deferred revenue.

I see. And, timing of that, Brad?

Well, I always like to have it sooner than later. But, it takes time. It's such a quick ramp-up to be able to build -- it's one thing to build your production labor force up quickly. That's a little bit easier to do than compared just to your service team, which you need experienced people out in the field away from your home office, working directly with customers. So, building that up and getting the right people takes time, and with the tremendous ramp-up we've had, again, compared to where we were just a year ago, we still have work to do to build up and improve our service organization.

Having said that, they're doing a great job, and we continue to have great relationships with our customers. But there's still work to do there, and it's going to take a little bit of time. It will always take some time as revenues and shipments continue to ramp up, just because there are typically going to more deferrals than acceptances in a quarter. So, it will take some time for that to flow through, and it will take even more time if revenues and shipments continue to ramp up.

Great, thanks. I have two more questions. First one is on the model. Commentary suggest that you expect operating margins to be down this quarter. I was wondering what is the driver for that, or maybe a better way to say is what do you expect gross margin to be roughly, in what range? And, operating margin, how do you think about it, is it going back to the 15.5% you did in the first quarter, or is just a little bit of a takedown in the second quarter?

Well, I would say that, first of all, we did a tremendous job this quarter, 40% gross margin is doing a tremendous job. We're really firing on all cylinders across all divisions of the Company. There's always a little bit of some mix that comes into play there from a product standpoint. The other is that we're not immune to higher commodity prices that start to filter through on some of our material costs, and we do an average material cost, unit cost, in our inventory at Tempress, which is our solar subsidiary. And, we start to see some of those costs start to creep in. It wasn't as significant as we had thought it to be for the June quarter -- I mean, for the March quarter, but we see it coming, and so I'm just trying really to be realistic on where our margins might be. In addition, we're forecasting again and giving guidance of higher revenues, which equates to higher shipments. Therefore, revenue deferral has an impact on your gross margin. So those are a couple of key drivers from a growth standpoint. From an operating standpoint, I will expect to see higher R&D costs at our key solar projects, including our ion implant development project in the June quarter compared to March.

But, does that increase as a percentage of revenue, or is it just increase as a dollar?

Well, we keep -- I'd say dollar-wise, primarily.

Okay. That's fair. One last question, and I'll go away. So, on the non-solar side, looks like over the last 2 or 3 quarters, both backlog and booking have been growing and at quite an actually healthy phase [Inaudible]. Nevertheless, I was wondering what is the driver behind that? Is it mostly this LED polishing you guys had mentioned in the prepared remarks, or is that something else behind that? Thank you.

Sure. I think two things. One is we've participated in a healthy way in some the semi equipment business with our Bruce division, and again, the semianalog space, and our with PR Hoffman polishing division; but, also, we benefited from what is happening from an LED standpoint and other markets that use sapphire substrates, and definitely we've seen benefit of that so far in this first 6 months of fiscal 2011.

Do you anticipate that to continue in that space?

I think indications are, yes, that will continue.

Great. That's all I have. Thank you.

Gordon Johnson, Axiom Capital Management.

Congratulations on a great quarter and significant improvement in cash. I guess I just have a couple of questions. With respect to your incremental orders in the second half of this year versus the first half, do you expect incremental orders to increase in the second half versus the first half of this year?

We don't know. Clearly, we see a sign that the market is slowing. The way we characterized was the speed of expansion is slowing, and I think it's fair to say that what's happening in the marketplace is taking over some pause, watching over the landscape and how aggressive they should be. Any newly emerging industry, as we experienced in the early days of semiconductor, will go through some hesitance in growing and hiccups. So, it can come back with some encouraging news coming out maybe in the second half. But, if we have to directly answer your question today, clearly we don't anticipate orders to be similarly good as us to have in second half.

Okay. That's very helpful. And, just one of the statistics we had on the Company awhile ago was that in general, $1 million in orders equals 30 MW of capacity. Is that statistic still the right one to use, or given that some of the customers have probably improved on their efficiency using diffusion furnaces, would that statistic have gone up by an even number of megawatts per $1 million in orders?

You are very good observing the industry, and it really varies from customer to customer. There's no prevailing new trend in the industry as yet. But, when I look at some customers, they are clearly improving efficiency, which makes us improve the output, like you said, even more than 30 MW with a high efficiency of technologies. But, it's not industry-wide enough to really say one way or the other, it's a rather selective event.

Okay. That's very helpful. You guys may have provided this figure, just housekeeping questions here. What was the CapEx in the quarter, and what should we think about it for the fiscal year?

CapEx for the quarter was, call it $2.9 million -- well, for the year. The first 6 months is $2.9 million.

Okay. That's for the first 6 months.

Right.

And, I'm sorry. Did you provide it for the quarter?

We didn't. I can get that to you offline.

Okay. Thanks. And, what was -- I guess this will come out in the Q, but what was the operating cash flow for the quarter, maybe the first 6 months?

First 6 months is $11.2 million.

And, I guess one of the concerns clearly that was voiced in some of the questions that have been asked previously is, that there's been a pretty significant slowdown in sales evident by the Taiwanese numbers that were finalized today. The sell track, the sell guys we track, were down 30% month-over-month in revenues. I guess, if there's some issues or if there is some pull-back in capacity expansions at some point in China, how should we think about you guys addressing those issues from a growth perspective, and just from a six to twelve month looking-forward perspective? Will you transition more to your other business, or will you try to get better penetration with N-type, which certainly seems possible? How should we think about that?

Obviously, we don't and we cannot control the market, and we can only closely follow and plan, and also react. And I think one thing that separates us from others is having N-type product as you mentioned. We are hoping that as we've seen in the semiconductor industry during the slow period, the technology buy will come into play and give us more help, as well as continue engaging investment into existing old line to improve their productivity and also performance. And, so, it's really too early to project clearly, but we feel that we are more hopeful than others by having high-efficiency N-type technology product.

All right. Thanks a lot, and congratulations again on a very good quarter.

Howard Halpern, Taglich Brothers.

Congratulations, guys. I think almost all of the questions that were asked were answered pretty well. Just on the N-type, once you start getting orders and are able to get it in production next year, is the same workforce going to be able to transition to producing that N-type, therefore, keeping efficiencies and gross margin in place?

Would it be not an easy task. However, our track record is rather good at being able to, not just once, but twice. both our one in 2008 and also 2010, doubling our capacity without creating huge operational problems. Of course, when you double up the production capacity, and there's some small issues that always comes up; but by and large, we feel that our capability has been demonstrated to really ramp-up our production. So I believe we can live up to it.

And, in terms of the LED market, what do you see for the Company as growing revenues? Organically and through your own R&D development, or do you think that there are either acquisition candidates or technology acquisition candidates out there for you to grow that business?

We haven't really completed formulating our LED growth strategy as yet. While we are beginning to allocate our management's time to handle more permission, more quality and permissions of the competitive process over formulating our growth plan. But, LED will also have a very similar approach as what we have been doing for solar, and solar growth, if you look at it, and it's a combination of both our organic growth by existing technology and continued investing into existing technology to improve the process, as well as acquisitions, which I'm referring to the R2D Ingenrie automation company we acquired in 2007 in France. So, undoubtedly, it was a combination of organic growth, which we are very busy, although the scale is small yet, and we'll be keen to explore external growth opportunities.

Great. Well, thanks, guys, and keep up the great work.

Jay Srivatsa, Chardan Capital Markets.

Congratulations on a good quarter. Just one question. Obviously the demand has been pretty strong. How is your manufacturing capacity? Are you able to -- are you confident about meeting the demand as you look through the next couple of quarters?

Yes, Jay. Thank you. We are. I think that's what gives us confidence to increase our guidance, that we'll be able to continue this growth in our ramp-up. Our operations guys have done a tremendous job building that up, and just as importantly, working with our supply chain. So, we feel confident in the guidance that we've given.

Okay. Thank you very much.

Follow-up from the line of Edwin Mok from Needham & Co.

I guess we answered his question.

Sorry.

That's okay.

Yes, but in terms of this first half of the year, I was wondering, how much is your top-end customer, and maybe how many customer was greater than 10%.

I know we disclosed in our 10-Q that our customer base is -- give me a second to -- from a revenue from accounts receivable standpoint. It just can't find that here real quick. So, I'll just have to -- can I give you a call back offline on that?

Sure, no problem. That's all I have. Thank you.

Aaron Martin, AIGH Investment Partners.

Congratulations on your continued progress in moving forward. I have a quick question on the affect of the dollar, being relatively weak against the euro since the beginning of the year. How much did that affect the bookings for this quarter?

In general, when you think about Amtech, particularly our solar business is predominantly manufactured in Europe, and our contracts are in euros. So, as the euro strengthens against the dollar, that tends to inflate our P&L, [Inaudible] and our backlog. I think we talked about it it improved, having an impact year-to-date on our backlog of about $10 million.

Specifically on the bookings?

Yes. Bookings, we basically record those during the quarter, and we the effect of inflation or deflation really we show impacting the backlog.

And, I assume, there's a nice up tick on the gross margin, and that was the deferred revenues from the previous quarters catching up. Is that a fair assumption?

Not really. Not really, because we still had a healthy net deferral in the quarter. So, it really was a combination of efficiencies, pushing through a lot of product, a lot of furnaces during the quarter, but also all of our subsidiaries really run at a good clip this quarter.

Okay. Great. And, just about being more confident than your competition in terms of order push-out, it seems like the push-outs are related to one particular customer as opposed to being so broad-based. Do you sell it at all to that customer?

Yes. Are you referring to the other solar equipment company?

Yes.

Yes. As far as we know who that customer is, the answer is no.

Okay. And, then do you break out how much of this quarter's revenue was related to N-type?

We don't.

Okay. All right. Great. Congratulations, guys.

Josh Goldberg, G2 investment partners.

Quick questions. First is, just so I get it clear, your bookings for the first half of the year were over $200 million, is that right?

That's right.

So, the idea that, and I agree with you that orders will slow, but the idea that they'll be below what you were expecting in the first half of the year, I don't think that's really kind of saying much in terms of disappointment?

Correct.

And, your cash flow went up to $67.5 million for the quarter?

That's right.

Are you expecting to generate cash over the next 2 quarters as you continue to grow your top line?

There's always the balance that we have -- as you grow your top line and invest in your working capital and AR and inventory, you tend to use some cash during that time, but we've been able to finance a lot of the working capital through customer deposits. So, that's just kind of a give and take. We would expect that eventually that should turn into cash, because we're generating some healthy EBITDA.

Okay. Is there a certain amount of cash you want to keep on your balance sheet versus maybe acquisition, share buyback?

Yes. We're not really in a thought mode right now on share buyback or anything like that. I think our focus is right now taking advantage of, one, the momentum we have in the industry, both predominantly solar and with some emerging opportunities as we look into LED to take advantage of those opportunities. And, if you look at us as a Company, how this Company has been built and how it's been running over long-term history and it's short-term history. We are acquisitive, and we bring technology and products in and grow them, as we've done with every acquisition so far to date.

Okay. Either Brad or J.S., can you just comment a little bit on the recent acquisition by Applied Materials and how that would affect some of the stuff you're planning on doing on the solar side?

I'll take the first shot at it, and I'll let J.S. correct me. I don't think this is a surprise to anybody in the semi industry, that Applied was going after a Alvarion. I think that's been talked about for a long time, because Alvarion is a market leader on the ion implant side. So, I think this will, from what I can see , what I read in the press release, the focus in their press release was semi, with solar being an add-on to that. So, I think it was focused on semi with the icing on the cake being the other markets that they might pursue. J.S.?

In addition to that, from a solar angle, I think this is a testimony to why we all should be optimistic about the long-term aspect of our solar industry. And, I think it's all a good sign that many outside of our solar industry, inside of our solar industry, believe a great parity will be met within the next five years, if not sooner, and solar energy will compliment the existing fossil-fuel- based energies and grow together in that energy industry. So, I took it as a very positive for our solar outlook.

Okay. Great. Thanks.

Thank you, and I'm showing no further questions at this time. I would like to turn the call back to Management for closing remarks.

Thank you all for joining us today. We look forward to reporting to you again on our progress, and really appreciate your continued interest in Amtech. Thank you.

Thanks a lot.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.