Amtech Systems Inc (ASYS) 2011 Q3 法說會逐字稿

Welcome to the Amtech Systems' third quarter fiscal 2011 fiscal results conference call.

(Operator Instructions)

This conference is being recorded today, Tuesday, August 9, 2011, I would now like to turn the conference over to Mr. Jim Byers at MKR Group. Please go ahead, sir.

Thank you, operator. Hello, everyone, and thank you for joining us the afternoon for Amtech Systems' third quarter conference call. On the call today are J.S. Whang, Amtech's Chief Executive Officer, and Brad Anderson, Amtech's Chief Financial Officer. After the close of market trading today, Amtech released its third quarter fiscal 2011 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 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, and before we begin, let me note that during today's call, the Company will be making 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.

Some of 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 and volatility in the demand for its products, the effect of changing worldwide political and economic conditions on government funded solar initiative, capital expenditures, production levels, including those in Europe and Asia, the effect of overall market conditions, including the equity and credit markets, and market acceptance risks. Other risk factors are detailed in the Company's Securities and Exchange Commission filings, including its forms 10-K and form 10-Q. With that said, I will now turn the call over to Mr. J.S. Whang.

Thank you, Jim. Good afternoon everyone, and thank you for joining us. We are very pleased to report a fifth consecutive quarter of record revenue. Our Q3 revenue of $72 million is up 67% year-over-year, and our diluted earnings per share of $0.74 is up 76% year-over-year. For the first 9 months of this fiscal year, we produced $187 million in revenues, and $2.03 in diluted earnings per share. If you look at our results for the trailing 12 months ending June 30th, they are truly impressive. We had the bookings of $273 million, revenues of $232 million, and $2.61 of diluted earnings per share. So a tremendous operational performance further demonstrates our superior solar division technology and operational capability to manage and service the high growth cycles of the solar market.

We enter the September quarter with a healthy order backlog of $140 million, and remain on track to produce and ship at high volume in Q4, and expect to achieve our full year revenue guidance, $240 million plus, for fiscal 2011. While our order pipeline has slowed significantly, given the near-term uncertainty in the solar broader market, our healthy capital position will allow us to intensify our effort to increase our division market share and execute on our key solar development programs, including our solar ion implant project, and while we are still early in the process, our ion implement development efforts continue to show promise. The strong market momentum and revenue success we have produced this fiscal year reflect the technology leadership we have achieved in high efficiency solar positions, which is our core competency, and we continue to make good progress leveraging this success and our expertise to expand our solar capabilities and market opportunities. As we continue to transform into a solar technology leader, we are positioning ourself for continued strong growth as the solar market moves toward next generation higher efficiencies and lower cost of ownership.

For our N-type, we are actively engaged with an increasing number of potential customers for our high efficiency and N-type solar technology. As we have noted before, this is a new technology [fair] process that requires a longer validation time in gaining customer acceptance of the technology, as opposed to a matured technology product sale. We may see some N-type orders this calendar year, with a more meaningful ramp in sales in calendar 2012. As to LED market, as we noted on our last call, we are pleased to see growth in revenue for our wafer polishing consumables to manufacturers of sapphire and silicon carbide wafers used in the LED market. While this has been small part of our total revenue, it provides us an entry into a new market, and we have benefited from the LED growth cycle. We have been focusing on information gathering to complete the process of formulating our growth strategy to capitalize on this new growing LED market.

During our Q3, we further strengthened our management depth and technology capabilities with the appointment of Albert Hasper to general manager of our Tempress service area. His successful track record as a senior operating officer in a top-tier capital equipment company will be a very valuable asset to our Company, and the experience that he brings further strengthens our operational capability in organic innovation.

In conclusion, we remain focused on successful execution of our solar growth strategy, and remain optimistic about the long-term growth opportunities in this market. We remain on track to produce and ship, at a significant volume in Q4, and achieve our full year revenue guidance for fiscal 2011. I will now turn the call over to our Executive Vice-President and CFO, Brad, to discuss our financial results. Brad?

Thank you, J.S. We are very pleased to report another strong quarter. Third quarter net revenue was a record $71.9 million, up 17% sequentially from the preceding quarter's record revenue, and up 67% from the third quarter last year, again driven primarily by higher system shipments to customers in the solar industry. Quarterly bookings in the third quarter were $13 million, including $7 million in solar orders, compared to $72 million the preceding quarter. For the first 9 months of fiscal 2011, our bookings totaled $223 million, including $196 million in solar orders. We enter the September quarter with a strong backlog of $40 million, which includes $130 million in solar orders. As a reminder, our backlog includes deferred revenue and customer orders that are expected to ship within the next 12 months.

Our third quarter gross margin was 36%, compared to gross margin of 40% in the preceding quarter, and 37% in the third quarter of 2010. The decrease in the gross margin is primarily attributable to higher material costs, an increased field service, and related travel related costs. Our SG&A expenses in the third quarter were $12 million, or 17% of revenue, compared to $11.2 million, or 18% of revenue, in the preceding quarter. SG&A expense reflects increased commissions and shipping costs on higher revenues, and higher legal and consulting fees. Depreciation and amortization in the third quarter was $774,000, compared to $439,000 in the prior year third quarter. Included in the third quarter fiscal 2011 results is $356,000 of stock option expense, compared to $187,000 in the third quarter a year ago. Income taxes in the third quarter were $5.2 million, reflecting an effective tax rate of approximately 42%. This compares to a 40% effective tax rate in the preceding quarter. The increase in the effective tax rate is due primarily to increases in uncertain tax positions, valuation allowances on certain foreign net operating losses, and permanent differences.

Net income for the third quarter of fiscal 2011 was $7.3 million, or $0.74 per diluted share, compared to net income of $7.5 million, or $0.77 per diluted share in the preceding quarter, and net income of $3.9 million, or $0.42 per diluted share in the third quarter last year. Total revenue by geographic region for the fiscal third quarter was Asia-Pacific region at 91%, North America at 5%, and Europe at 4%.

Now turning to our outlook. We are reiterating our guidance for fiscal 2011 full year revenues to be in the range of $240 million to $243 million, a 100% increase from fiscal 2010. For the September quarter we expect revenues in the range of $53 million to $56 million. Our operating margins in the September quarter are expected to be negatively impacted by lower shipment volumes, expected higher material costs, and substantially higher R&D costs resulting from our solar development programs, including our solar ion implant project.

So to recap, we had another strong quarter, including record revenue. Our performance over the trailing 12 months, June 30th, of $273 million in bookings, $232 million in revenues, and $2.61 of diluted earnings per share, further demonstrate our ability to capture increased market share and profitably execute on it. We have a healthy backlog of $140 million. We are increasing our investment in technology today to support our customers' higher solar efficiency road maps and position ourselves for continued strong growth into the future.

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

Thank you, sir. Ladies and gentlemen we'll now begin the question-and-answer session.

(Operator Instructions)

Our first question is from the line of Colin Pusch with ThinkEquity. Please go ahead.

Hey, guys. Can you talk about how long it is going to take you to work down the backlog. $140 million looks like a pretty healthy number still, especially if you are looking at mid-$50 million in revenue this next quarter.

Sure, Collin. As you highlighted, our guidance is in the $53 million to $56 million for the quarter. That backlog that we have includes orders, and our deferred revenue in there, also. So, there is still a healthy amount left, even after we finish this quarter.

Okay. So, and out of that $53 million to $56 million, how much of that is deferred revenue you expect?

We don't normally usually give out, split out, the deferred revenue piece of it in the guidance that we give.

Okay.

But there will be continued deferrals.

Okay. Perfect, and then I guess I'm trying to get to a cash conversion as you collect on a bunch of these receivables. How much of the receivables do you think you're going to be able to work down next quarter, or in the third quarter, I should say, or in the September quarter?

Well, the working capital tends to ebb and flow just a little bit with our business, but we do expect to see some positive pickup on the receivables during the quarter, and over the next couple of quarters expect to be able to unlock some of the cash that we tied in working capital during the June quarter.

Great, and just one final 1 from me. Are you seeing any new geographies starting to open up outside of China for sales, in Korea or in India or anywhere else, start to look like an opportunity for you to grow sales?

Hi, Collin, J.S. We see some activities in Japan, but by and large Korea, Taiwan, in same mood as China, and gauging the current down cycles before they really commit any capital investment.

Perfect. Thanks a lot, guys.

Thank you, Collins.

Thank you, and our next question is from the line of Edwin Mock with Needham & Company. Please go ahead.

Hello. Thanks a lot for taking my question. So, first question is related to [solis I]. I think you guys talk about some of the new, potential new customer for high efficiency solar cell. Can I ask you, is that predominately through outside of China, or have you started to have discussions with companies inside China?

Yes, we do have an interested party, or parties, in China, and also outside of China for our N-type, and we are making steady progress on multiple customers.

I see, great, but on the $130 million of solar backlog, how much of that is N-type, and is that predominantly just the first customer you guys have?

Well, included in that backlog is some N-type, but it is still related to Yingli.

I see, yes. Just wanted to clarify that. Great. Very helpful, and then on your last quarter, I noticed that bookings for the semi side also declined sequentially. Was that just relate to kind of the end market there, or was that relate to LEDs? Can you help us out and explain why it was, the decline?

Sure. Part of that is due to some lumpiness within the semi. That is, we is have been providing some furnaces from our Bruce technologies line to a key customer, and when those orders are placed, tend to, obviously, increase bookings for that quarter, and when they don't order in the quarter, you can see the drop-off. So it's really an equipment lumpiness.

I see. Okay. That's fair, and then lastly, just in terms of margin, you mentioned you expect lower operating margin in the coming quarter, part of this on lower revenue (inaudible) increased R&D expense, just wondering, just want to kind of know how much are we talking about in terms of increasing operating expense sequentially, and I suspect in the coming quarter, you'll have a lower mix of solar equipment versus the influence of semi. Does that mix help or hurt you in terms of margins?

Well, let's just take a step back real quick and look at the incredible ramp-up that we've been having from a quarter-to-quarter basis on our operations, I think I used this term a couple of times on some earlier calls, even maybe back as far back as a year ago, that as we start to ramp up, you tend to hyper-utilize your resources, which includes human resources, besides your capital resources, and you kind of have to play catch-up to support that, and eventually you have to build up some of your cost structure to support that, and that's what we've been trying to do at a breakneck pace with our revenue ramp-up.

So, you start to see some of those costs come into play. Shutting off those costs that, very quickly, you just cannot do it that quick. We have to continue to look at how we right-size the business for what's going to be in the future, and the other part of that, as it relates to operating margin, probably the biggest piece of it is going to be an increase in R&D expenditures, as we have mentioned in our guidance. In particular., on multiple solar development programs, but including our solar ion implant,, and we are working very hard, even accelerating the pace of our ion implant development because of the promising results that we see so far.

And how much of an increase are you talking about, sequentially?

I have not quantified that.

I see. That's fair, but just looking at how the company has performed over the last several quarters in terms of gross margin, is it safe to assume that gross margin will remain at this kind of mid-30 range, even with lower revenue, maybe a little lower sequentially, but nevertheless within, let's say, 30% range?

It's highly dependent on the amount of new deferrals versus acceptances in any quarter, because that does have a significant impact either way. As you start to spool down, you, at some point, will start to see the positive effect of more acceptances than deferrals. We just don't see that coming yet in the September quarter.

I see. Great. 1 last question for you, and I'll go away. Just quickly, on terms of your solar booking. Have you seen any cancellation, or is it just customers slowing back down bookings, given the kind of price environment that we saw in second quarter

We, I answer, J.S. We see, obviously, some movement, some also pushout. However, it doesn't really change the overall quality of our backlog. Our backlog remains quite healthy, and good quality.

And what's your lead time right now with a lower revenue rate level?

We are still over 5, 6 months.

I see, so even, because you mention some push down, and it doesn't sound like there's much cancellation on the customer side, and with that kind of lead time, I would suspect, that your backlog has, you still have the ability just this quarter, and probably into the December quarter, and even a little bit beyond that. Is that fair, to say that?

I would say it gives us some visibility in the December quarter, and after December quarter is still, the visibility is not clear.

Great, very, very helpful. Thanks for answering my questions.

Thank you.

And our next question is from the line of Mark Miller with Noble Financial Capital Markets. Please go ahead.

Just wondering if you could give us a quick update on your other 2 projects, the Silfy glass and the PECVD project, in terms of how they're coming along.

As we noted the previous conference call, we are continuing with the process development for the higher efficiency process, and rather than introduce product as a BT product,, our focus has changed to higher efficiency effort. That's our process, our development is focused.

You mentioned, I think you mentioned last conference call, that you had received some share gain. I just wonder if you could comment, and is that continuing, and what do you think your share is in the furnace market?

As far as our market share, the third party number that's been out there, and has been out there for a little while now, showed us at about 40%. As far as activity in the last quarter or 2, I would say there probably hasn't been much change occurred in that market share.

And, I don't know if you want to comment on this, but just from what I've been reading, between what are called tier 1 and some people term upper tier 2, there's maybe 23 to 25 gigawatts of manufacturing capacity, and this is my question. You don't seem to get into projections above that for at least until 2013 in terms of the demand for the capacity. Is that your feeling, or that's what I'm just trying to get a feeling for, is what can be produced right now in terms of what the demand is going ti be longer term.

I think 2011 demand is somewhere around 22, 23 gigawatts, and for the longer term, we are quite encouraged, based on how quickly solar energy cost is coming down, and so fundamentals for long time use are very bright. As to the near term demand, we really are in process of closely following the tier 1 and tier 2 customers, and when our demand will tick closer to the high 20s gigawatt, which time, capital investment will resume. That's our expectations.

Okay. Just 1 final question. What was your cash flow from operations?

The cash flow from operations per the cash flow statement in the 10-Q was about $5.4 million.

Okay. Thank you.

That's for the 9 months ended June 30.

Thank you.

Thank you, and our next question is from the line of Gordon Johnson with Axiom Capital Management. Please go ahead.

Thank you for taking my question, gentlemen.

Hello Gordon.

How are you?

Doing well,

I guess I just have a couple of questions. It looks like your orders, your solar orders, are down pretty aggressively fiscal Q2 to fiscal 3Q. How should we think about that trending going forward?

I would say there's some uncertainty out there in the marketplace, and I think that's causing a lot of people to look at the current situation and re-evaluate when they're going to place their next orders. Again, it's still, we believe, a question of when, not if. It's just a matter of how long that's going to last. With that said that's what backlog is for and why we continue to reiterate that we have a healthy backlog, and we haven't seen any cancellations of any significance coming out of that backlog.

Okay. So, there haven't been any cancellations of the backlog, or any material cancellations?

Any cancellations of any significance.

Okay, and next quarter, with respect to solar orders, should we expect a similar level, or will we see that number start to pick up next quarter?

Hi, Gordon, J.S. here. When I look at the order pipeline, and there are some signs that things will get improved in Q4, ending Q4.

However, it is a quite moody out there. So, it's not definitive way that we can respond to that, but order pipeline shows improved number, if it all comes down to the purchase order.

Okay. That's helpful, J.S, Thank you, and then just some housekeeping questions. You said your operating expenses are going to increase sequentially. Overall, should we expect the operating expenses in the fiscal fourth quarter to be higher than the fiscal third quarter?

Overall, yes, although commissions will be down, too, and what's really driving is there will be higher R&D costs.

Okay, and last time we had a downturn in 2009, those OpEx numbers kind of stayed at those kind of levels that we saw kind of before the downturn. Should we expect any, maybe the numbers are higher, OpEx is higher in fiscal Q4, but should we expect thereafter a moderation in OpEx, or will it remain at those levels?

We will continue to evaluate the appropriate level of operational and service and support personnel that we should, costs that we should maintain during this downturn. I guess I would point out to what we did during that last downturn, is we took the appropriate actions and we managed the business, I think in a very responsible and effective way, and we'll do it again. That's just who we are. That's who we have in place.

Okay, and then lastly, on the tax rate, how should we think about that moving forward?

With the lower volume in revenue, expectation would be that tax rate would stay pretty consistent with what we saw in the third quarter, and, as I mentioned, I think maybe in the previous call, we do have a tax restructuring program going in that we are working on and making it, plan on making it effective in fiscal 2012. It will result in some short term increase in the effective tax rate, but long term should start to see a nice reduction in our effective tax rate.

Okay. Excellent. Thank you, gentlemen.

Thank you, and our next question is from the line of Howard Halpern with Taglich Brothers. Please go ahead.

Good afternoon, just a couple of questions. You talked about the improved order pipeline. Is that being driven by the N-type technology?

Mostly P-type. As we have engaged with multiple potential N-type customers, as I stated earlier, the validation time, technology validation time for new technology takes a little bit longer for them to mature the product line, and so what is in the pipeline is largely our the P-type.

Okay, but if in general is the uncertainty out there also give you go window to get that acceptance of the N-type, so when they start makes decisions, that N-type will be right there?

What we see is tier 1, particularly tier 1 customers, are picking up the pace, transitioning program, from lower efficiency to higher efficiencies, and so we expect to benefit from that.

And the 1, I guess, aspect of the margins, is material costs. What type of impact did that have on the current quarter, and is that, what we see in the current quarter going to continue for the next couple of quarters?

Yes, it did have some impact on the current quarter. As I mentioned in the guidance for, back in May we gave for the June quarter, I mentioned that could have an impact, and it did have some, and we'll continue see that trend here in the September quarter.

I mean, anything that you're working on to mitigate the cost, or the cost is really just the cost at this point?

Well, we continue to always look at ways to reduce our costs, but part of it is we use an average cost method, and with the buildup, the substantial buildup we had going into fiscal 2011, and needing to place large orders, especially on key components, like quartz and other materials, saw prices increase, because there's demand across the board, whether it was us and solar, and other solar players, or in the semiconductor. Those prices have subsided right now, but those costs still are in our inventory, starting to come through from an average cost standpoint.

Okay. Well, thanks, and keep up the great work.

Thank you, Howard.

Thank you. And our next question is from the line of Jay Srivatsa with Chardan Capital Markets. Pleased go ahead.

Yes, thanks for taking my question. J.S., it appears in China, despite talk about slowdowns and stuff, they seem to be still investing in capacity expansion. Your customer, Yingli, has talked about how they see Q2 growth of almost 35% in TV margins. Can you address what you're seeing there and how that correlates to what you are seeing in the rest of the industry?

I do believe that some of our tier 1 customers, particularly who has financial strength, is continuing with their capacity buildup program that they initiated some months back, prior to this steep down-cycle, and otherwise the next expansions of program probably have to wait until end market demand reaching high 20s gigawatt. So, what we see, some expansion activity, is the project that was already in the pipeline is continuing, and those tier 2 had no expansion plan execution, is probably stretching our, their timeline, and trying to monitor the line of potential sign of recovery.

Okay. Competitively, looks like centraderm is making a big push in Asia, setting up sales offices across the board. How do you see that? I mean, with your exposure to the Asian markets being as high as it is, are you concerned, as you look ahead, when the market turns that you'll face a more stiffer competition?

As we stated earlier, our near-term focus is increasing our market share, and we're putting much effort into that, and centraderm has been aggressive in Asia for, as far as we know them, and with that, though, centraderm' s aggressive approach, and we've been gaining our market share to this date, and so it's not something new, and we are intensifying our effort.

Okay. Last question, with Q4 being as light as it is, and as you said with little visibility beyond Q4, are you looking at cutting your costs and expense structure through different measures, and, if so, could you share, what are some of the options you're exploring?

Sure, Jay, This is Brad. Of course, we continue to reevaluate what is the optimal level to be at, and we'll take actions. What we have done in the past is we look at personnel levels, at the various divisions, and see what makes sense. Part of this ramp-up that we did for, to meet this incredible ramp-up in revenues and shipments, we are now, we did that with quite a bit of temporary personnel. So, we look at being able to manage it, be a little more flexible from that standpoint.

We are already are revisiting our supply chain, and trying to manage that through with our inventory levels, so we don't have too much working capital tied up in inventory. Having said that, we've all seen how quickly this can come back, too. So, we have to be, continue to have some operational flexibility, and we'll do that. That's who we are.

Okay. 1 last question. With the stock having pulled back significantly over the last 3 to 6 months, and with roughly $60 million in cash, are you exploring any buybacks, and if so, when do you hope to be able to execute on something like that?

We have, as far as the recent pullback, I think everybody is feeling that, with us and across the board, but we continue to manage our cash wisely. This company has been built on selective acquisitions, and I don't see any reason why we're going to stop doing what we've been doing in the past and been successful at.

So, we're going to continue to take advantage of this opportunity to continue to grow the company, both through internal innovation and acquisitions, whether it be company, product, license, technology, we'll continue to aggressively look in those areas, and then as far as funds for stock buyback, we continue to always look at what makes sense, and makes the best use of the cash that we have on hand.

Thanks, J.S., thanks, Brad.

Thank you, Jay.

Thank you, and our next question is from the line of Ty Lilja with Feltl and Company. Please go ahead.

Hi, guys, thanks for taking my questions. First question, I was just wondering -- in an environment like this where capacity expansion has slowed down, where do the orders come from, like the 7 million you had this quarter, was that someone adding some additional capacity, or was that someone tinkering with their existing production lines?

It's still generally a capacity addition, and to keep in mind, the cost to be able to add a line, a 25, 30 megawatt line, it ranges, but let's just call it $10 million to $20 million. It's not a huge investment if you have a local bank providing you some leverage. So, there's that, and when we look at over-capacity, we have to look, I think people still are trying to get a handle, I say people in the marketplace, a handle on what is the real capacity, and there's a lot of numbers out there, and what is really bankable capacity.

So, there's still new entrants into the market. There's still larger players that are looking to add incremental capacity, and with their plans, and so there's still some of that, not really a lot of retrofitting of existing lines at this stage.

Okay. Sure, and then another question. I imagine you've had a number of conversations about the N-type technology at this point. I was wondering, when customers push back, what are they skeptical about? Are people skeptic about the cost, or about the technology, or the challenge of implementing it? What do you kind of see as the biggest challenge to winning adoption of N-type?

I'm not sure what we are seeing much pushback. Of course, there are different types of high efficiency technology, offered also by our competitors. Our discussion with the potential customers are favor of our N-type technology. It is more about technology verifications and validation process that takes a little longer time.

Okay. Sure and actually, based on your experience with Yingli, do you have a sense of how long validation could take once a customer starts working with the N-type?

I believe it varies customer to customers. The customers with the more in-depth technology base, and have established the technology team, will have a faster process versus the other way around.

Okay. All right. Thanks for taking my questions.

Thank you.

Thank you. And our next question is from the line of Dan Mendoza with Prospect Capital Advisors. Please go ahead.

Hi, I've got a few. What percentage of revenue were the top 3 customers in the quarter?

I think in our 10-Q. I don't have that in front of me, Dan, but we had --

Comparable in the mid-40s, or --

Yes, we would have to find that.

Okay.

I'll get back to you on it.

Okay, and then just to kind of follow up on the N-type question, what would be the earliest we might see bookings from a second customer? Is that something that could happen this calendar year, or is that too soon?

I believe we can expect some trial base order this calendar year, with the production of order coming in calendar year 2012.

Okay, and I guess overall, what sort of expectations should we have for N-type as a percentage of your orders for fiscal '12?

Our goal is to develop another Yingli case, and so we probably can reference of a split between P-type and Yingli N-type order. The number, that I don't have at my hand. Maybe Brad can come back to you with the numbers later.

Okay. That would be helpful.

Dan, on your first question, those top 3 customers accounted for about a little over 50% of our revenue.

Okay, and I mean, this might be pushing what you have in front of you, but would they be, what would that number look like as a percentage of the backlog? Similar to those 3?

Well, no. Actually that's 1 of the things that's been nice about the business is while any 1 quarter 1 customer may dominate, or several customers dominate your revenues or your backlogs or your receivables, it's never across the board that same customer.

Right.

And it's whether it's Yingli, or Trina or Chenko or BYD or Hamwha, they tend to fluctuate, and so that's --

Right, but if you look at the remaining backlog, is that more diversified than the 50% number, or less?

I would say it's more diversified.

Okay. That's helpful and then moving onto ion implant, is the plan still to have a beta tool sometime around the end of calendar year '12?

Calendar year '12? Definitely yes, that's our plan.

Okay, and what would be the cumulative development cost for that? Is this a $10 million development project, or can you help us size that?

Well, we haven't publicly said what the exact amounts are, but if you look at how we structured the acquisition, you can see that a significant amount of cash, I think there's an initial $4 million, and then another $4 million that's structured as a note, so that would imply that there's approximately about $8 million or so involved with that development program.

Okay. That's helpful, and then last question, just kind of with the material costs and the OpEx that you guys have talked about on the call, if the order weakness were to persist, I'm just trying to kind of get an understanding of what that current break-even revenue level is, based on the OpEx and material costs that you guys have highlighted?

Well, that number is a number that continues to fluctuate, depending on our cost structure, which has been dynamic over the last several quarters. So, we'll continue to look and evaluate where are that's at, and as far as, we normally don't just put out a public number that says this is our break-even. So, we typically do not say that in public (multiple voices).

Thank you, and our next question is from the line of Kevin Casey with Casey Capital. Please o ahead.

Hi, guys. Question, the R&D is up year-over-year. What's that being spent on?

You kind of cut out there on the end, Kevin, can you ask that question again?

The increase in R&D year-over-year, what's that being spent on?

Well, the big increase in that is being spent on the ion implant tool, because that came onboard mid-February of 2011. So that's 1, and then there are several other projects that we're working on, solar-related.

Okay. I mean, so obviously we're in a lull period here. When we come out of it, what's the probability that we're going to have new products ready for the market?

Well, our expectation continues to be, as we said, J.S. said in prepared remarks, the ion implant tool continues to show promise, and we expect to have that beta tool, as mentioned, by the end of calendar 2012, and our expectation is to have several other tools available next year.

These are tools that you're already working on, or is this new stuff? Have you scrapped some of the previous projects?

It's a combination of new and old.

And then when you, if you get an order today, how long until; it ships?

Well, there's, depending on the customer need, which is typically not going to be immediate right now, so that would put it at probably still in that 4-, 5-, 6-month range.

Okay. So, we basically have1, 2, 3 quarters of backlog, and we need, to stay at this run rate, we need orders to come in in the next 9 months?

That could be 1 assumption. I am not giving any forecast beyond what we already said about the September quarter.

I understand that, but I'm just taking the backlog times 3, All right. Sounds great. Thanks.

Thanks, Kevin.

Thank you. And we have a follow-up question from the line of Mark Miller. Please go ahead.

Just want to go back to the R&D costs. What I think I'm hearing is that the ion implant development has kind of accelerated, you're getting excited about that, because it seems like, to me, from the last conference call, that the R&D costs that we're thinking about now are significantly higher than what we thought 3 months ago. Is that is a fair assessment?

I think it's just the ramp-up of the development program itself.

Okay, and I just wanted to say, going into 2012, we're going to be higher next quarter looks like in R&D, significantly higher. Are we going to peak next year, or is it going to stay at that higher level, or go up?

As it relates to ion implant, there might some peaking and then some trailing off, but we'll continue to look at investing from a research development standpoint to the extent it makes sense from product development perspective, because we continue to work with our customers to provide, really, technology solutions, which requires some investments in future products.

All right. I think you've kind of, at least, indicated previously that there was some hopes for your other 2 tools maybe getting some initial sales next year. Do you still feel that way, or is that now being pushed further out?

I think from the standpoint of new tools, the 1 that we've talked about publicly recently is our ion development program, and I think there are other tools we're working on, and product improvement programs we're working for our existing tools.

Okay. Thank you.

Thank you, Mark.

Thank you, and there are no further questions at this time. I would now like to turn the call back over to management for closing remarks.

Well, 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. This concludes today's call.

Thank you, ladies and gentlemen., This concludes the Amtech Systems third quarter fiscal 2011 financial results conference call. A replay of today's conference will be available and today's press release. ACT would like to thank you for your participation. You may now disconnect.