Amtech Systems Inc (ASYS) 2012 Q1 法說會逐字稿

Good afternoon and welcome to the Amtech Systems first quarter 2012 financial results conference call. (Operator Instructions) I would now like to turn the conference over to Brad Anderson, CFO of Amtech Systems. Please go ahead, sir.

Hello everyone and thank you for joining us this afternoon for Amtech Systems first quarter 2012 financial results conference call. On the call today are JS Whang, Amtech's Executive Chairman; Fokko Pentinga, Chief Executive Officer and President; and myself, Brad Anderson, Chief Financial Officer. After the close of market trading today, Amtech released its first quarter 2012 financial results for the quarter ending December 31, 2011. The release will be posted on the Company's website at AmtechSystems.com.

During today's call management will make forward-looking statements. All such forward-looking statements are based on information available to us as of this date, and we assume no obligation to update any such forward-looking statements. These statements are not guarantees of future performance, and actual results could differ materially from current expectations.

Among the important factors which could cause actual results to differ materially from those in the forward-looking statements, are changes in the technologies used by our customers and competitors; change in volatility and the demand for its products; the effect of changing worldwide political and economic conditions on government funded solar initiatives, capital expenditures, production levels, including those in Europe and Asia; the effect of overall market conditions, including the equity and credit markets and market acceptance risks. Other risk factors are detailed in the Company's Securities & Exchange Commission filings, including its Form 10-K and Form 10-Q.

Let me quickly highlight the agenda for this discussion. JS Whang, our Executive Chairman will start with an overview of Amtech's overall corporate objectives and long-term strategies. Fokko Pentinga, our Chief Executive Officer will update you on the current operating environment and progress on our technologies and developments and then I will review our first quarter financial results year-over-year and sequential trends and outlook. So, I will now turn the call over to JS Whang, our Executive Chairman to begin the discussion.

Thank you, Brad. Good afternoon everyone and thank you for joining us. We really appreciate your continued interest in Amtech Systems. In 2011, we celebrated our 30th anniversary as a technology solutions company. Over our many years we have proven that Amtech is a highly relevant participant in the marketplace. Our long-term objective is to continue to be a market leader by providing highly cost effective leading-edge technology solutions to current and perspective customers in the solar, semiconductor and LED marketplace. plus, importantly, to expand our offerings in those markets (inaudible) find our product portfolio and future revenue streams.

At Amtech, our corporate wide focus has been and continues to be number one, innovation and deployment of next generation technology solutions for our customers and number two, enhancing shareholder value through long-term profitable growth. These focal points are what drives Amtech each and every day. Since last January 1st of this year, Fokko Pentinga has assumed the role of Amtech's CEO. This has allowed me to intensify our pursuit for new opportunities of strategic importance to the long-term profitable growth of the company. As you are aware, we are internally developing significant new technologies. Fokko will update you on our progress there.

At the same time, we continue to explore new market opportunities. Our objective is to diligently pursue strategic acquisitions to expand the size of the market we serve by increasing our product and technology offerings. We see very interesting and compelling strategic opportunities in solar, as well as in the semiconductor and LED industry. Although macroeconomic challenges across the globe continue to put pressure on the solar industry, we believe there is a significant worldwide commitment to expanding the use of solar energy as broader based grade parity is being achieved.

In solar, the objective is to continue to focus on technologies that can support our customers to achieve next generation higher efficiency solar cells at a lower total cost of ownership. I want to emphasize that in the pursuit of new opportunities, we will review each in the context of our well defined goal of maximizing return on capital in order to enhance long-term shareholder value. Our overall objective is to further diversify our offerings while building on our already proven business platform and technology current exchange.

Let me now turn the call over to Fokko Pentinga to discuss current operations and technologies in development. Fokko?

Thank you JS. We worked closely with our customers during the quarter and obtained a record amount of acceptances on our tools. We also continued to face significant headwinds in the December quarter; therefore, we further reduced cost in the quarter to align with the current demands. We have aggressively addressed both variable and fixed costs. We expect that by April 1, the majority of our current cost reduction plan will have been executed but we will continue to evaluate market demand and make adjustments as appropriate during the duration of this downturn.

We serve markets which experience rapidly changing technology trends and importantly we continue to invest in our research and product development activities in this slower sales environment. Our ongoing objectives are to provide the highest quality product and service to our customers, collaborate with our customers to develop technology and cost solutions to meet tomorrow's needs and prepare for the next growth cycle.

Let me now address some of the key development programs. First is our solar ion implant. We are developing an ion implant to provide our customers with a more complete solution for their next generation high efficiency solar cell production and as a possible upgrade to their existing solar manufacturing lines. Our plan is to introduce our solar ion implant system at the Shanghai solar show this May. In the meantime, we are encouraged by the positive feedback from very selective potential customers in China. We continue to see good progress and are excited about the value that this offering will bring to the marketplace.

Next is the N-type. The development of N-type technology is continuing for future high efficiency cells, together with our technology partner, ECN and also Yingli. The offering today is at 19.5% efficiency and we have a roadmap for efficiencies to 20% and more. There's also some other programs during 2012. We expect to introduce our next generation solar batch diffusion system and other solar products internally developed, including batch PECVD that will expand our served available market.

Now about the market situation. Now that Asia came back after the Chinese New Year break, we see that the cell production levels have increased and some are even back and full production again. This is of course crucial for any new equipment purchases. If the total cell production capacity is still much higher than the demand, the emphasis is more on offering efficiency improvements than on expansion, although we do see activity for some expansions.

On our N-type offering, our N-type offering is getting more and more interest, both from our existing customers as from new potential customers. If the change to N-type is a major step to a new technology, this also means that customers go through more in-depth discussions on the technology, which takes time. With the improved cell production levels and the need for higher efficiency with a roadmap to more than 20%, we are optimistic that this will lead to commitments within this year. This could mean shipments in our fiscal year 2013.

And before I turn the call over to Brad, let me conclude by emphasizing that we have greatly increased our focus in innovation and new technologies and solutions to provide higher efficiency solar cell production at a lower cost of ownership. With that in mind, we look forward to the introduction of our new technology offerings in 2012, which include, as mentioned, the INM plant, the high-efficiency N-type, the new batch diffusion and batch PECVD.

Although the current supply and demand imbalance remains an issue today, we feel this environment, with our strong balance sheet and cash position has an opportunity to prepare for the next solar expansion cycle. We are very positive about the long-term growth opportunity and expect to emerge from this down cycle as an even stronger company in our selected markets. In that regard, we will focus our effort on continued investment in promising new technology solutions to expand our solar and non-solar products and services.

And now I'd like to give it over to Brad for the financial side. Brad?

Thanks Fokko. Let's review our first quarter results. Net revenue for the first quarter of fiscal 2012 was $24.7 million, down 59% sequentially from $59.9 million for the preceding quarter and down 54% from the first quarter of fiscal 2011. The decrease was driven by lower systems shipments to customers in the solar industry, partially offset by increased recognition of previously deferred revenue and higher shipments to the semiconductor industry.

Semiconductor revenue totaled $9.1 million, a 16% increase from semiconductor revenue in the first quarter of fiscal 2011 and 19% sequentially. Total orders in the first quarter of fiscal 2012 were $11.1 million, $3.1 million of which were for solar, down 34% compared to total orders of $16.8 million, which included $4.7 million of solar orders in the preceding quarter, again primarily the reduction due to overcapacity in the solar market.

At December 31, 2011 the company's total order backlog was $69.2 million, compared to total backlog of $85.9 million at September 30, 2011. Solar backlog at December 31st was $55.8 million compared to solar backlog of $71.2 million at September 30th. The effect of foreign exchange on backlog was a negative $3.1 million in the December quarter. As a reminder, backlog includes deferred revenue and customer orders that are expected to ship within the next twelve months.

Gross margin in the first quarter of fiscal 2012 was 29%, compared to 34% sequentially and 36% in the first quarter of fiscal 2011. The lower gross margin was primarily due to lower sales volumes, resulting in less efficient capacity utilization and lower average selling prices due to product mix with more research and development systems shipped to leading solar research institutes. The lower margins were significantly offset by record recognition of previously deferred profit and cost reductions in manufacturing labor.

Selling, general and administrative expenses in the first quarter of fiscal 2012 were $6.3 million, compared to $10.1 million in the preceding quarter and $10.4 million in the first quarter a year ago. The decrease in SG&A expenses as compared to the first quarter of fiscal 2011 was primarily due to lower commissions and shipping costs associated with lower volumes, as well and lower legal and consulting fees associated with our acquisition activities.

As a result of lower shipment volumes, selling expenses were 16% lower than third quarter 2012. SG&A expenses for fiscal 2012's third and first quarters were approximately 17% of revenue, which is consistent with the first quarter of 2010.

R&D expense was $2.8 million in the first quarter of fiscal 2012 compared to $2.1 million in the preceding quarter, and $800,000 in the first quarter of fiscal 2011. Year-over-year quarterly change is primarily due to investment in the company's solar ion implant project and development costs associated with other products and technology development programs that Fokko discussed.

Depreciation and amortization in the first quarter of fiscal 2012 was $769,000 compared to $818,000 in the fourth quarter of fiscal 2011. Included in the first quarter of fiscal 2012 is $465,000 of stock option expense compared to $374,000 in the fiscal first quarter year ago and $271,000 in the fourth quarter of fiscal 2011.

Income tax benefit in the first quarter of fiscal 2012 was $320,000, resulting in an effective tax rate of approximately 18%. The net loss for the first quarter of fiscal 2012 was $876,000 or a loss of $0.09 per share compared to net income of $5 million or $0.52 per diluted share for the first quarter of fiscal 2011 and net income of $3.1 million or $0.31 per diluted share the preceding quarter.

Our total revenue by geographic region for the first quarter was Asia-Pacific at 68%; Europe at 24%; and North America at 8%.

We continue to maintain a solid financial position with essentially no debt and total cash and cash equivalents of $54.9 million at December 31st, compared to $67.4 million at September 30th. The decrease in cash is primarily due to payments to vendors in excess to receipts from customers and $4.1 million in payments made in October to shareholders of Kingstone in connection with the amendment to the Kingstone stock purchase agreement which was previously disclosed. At December 31st we had working capital of approximately $90 million.

We continue to be focused on reducing our inventory levels and purchase commitments. Our purchase commitments peaked at $80 million at the end of the March quarter a year ago and have been reduced by almost $50 million since then. In fact, during the December quarter alone, we reduced our purchase commitments by over $14 million.

Now let me turn to our outlook. While visibility in 2012 continues to be limited, we maintain a long-term positive outlook on the solar market. The current supply/demand imbalance and global economic conditions continue to impact solar cell manufacturers, our principle customer base. As a result, we expect revenues in our fiscal 2012 second quarter ending March 31st to be in the range of $20 million to $22 million and gross margins to be in line with or slightly lower than first quarter results. With our R&D expenses expected to be significantly higher in the March quarter due primarily to the solar ion implant project, we expect to incur a higher net loss for the quarter.

As a reminder, our operating results could be impacted by the timing of system shipments, but net impact of revenue deferral on those shipments and the recognition of revenue based on customer acceptances, all of which have in the past and can in the future have a significant effect on operating results. In addition, a substantial portion of our revenues is denominated in Euros. The revenue outlook we have provided is based on an assumed exchange rate between the United States dollar and the Euro, a significant decrease in the value of the Euro in relation to the US dollar could cause our actual revenues to be lower than anticipated.

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

(Operator Instructions) Colin Rusch, ThinkEquity.

This is Robert for Colin. If you could talk a little bit about your backlog and the acceptances within your backlog versus new tools that were recently added?

Backlog is always made up at the end of each quarter, a combination of actual orders and deferred revenue that is in the backlog. Nothing's really changed from that. As we get new orders, obviously those are added to the backlog; shipments reduce the backlog. The composition of it still remains the same and as we receive acceptances, that reduces the backlog also.

You were talking about how as we go forward we think that solar activity is going to be related to efficiency gains in the equipment market. Can you give us a little bit more background on what you guys are seeing and the discussions you're having with your customers in terms of timing and expectations for what sort of thresholds you're looking for in terms of efficiency gains and timing?

Let me try to say something about it. First of all, at this moment, as I mentioned, the demand for new equipment is still limited and the market is slow, so people do take time. If you talk about what is the threshold with people for new technologies, the numbers that we quote presently at the 19.5% for example on a new technology like N-type, is definitely a good number but people want to see a roadmap to 20% or more. So it is stepping into a new technology, which is a big step and if you would be limited to that number 19.5-19 then it would not be sufficient so they definitely need a roadmap to route to the 20% plus. It doesn't have to be there today, but it should be there in the foreseeable future.

The last bit of that is do you expect while we're seeing an increase in utilization and activity right now, do you expect that to accelerate as we get closer to the traditional construction season or what's happening now, more just a near-term thing that's going to fade away?

Well, it's a combination of course the winter in Europe doesn't really help, but I think the biggest difference will be the speed in which China will start to consume larger numbers. There have been some very recent publications or at least information on the net where their numbers are expected to grow significantly and how quick that goes in China, that's sometimes a little bit unpredictable. Often it goes quicker than we expect. So I think that's going to have the biggest impact, especially on the tier one Chinese cell manufacturers which I would assume will have a bit of a better position to get a large portion of this. So I think it's going to be the biggest driver.

Jay Srivatsa, Chardan Capital Markets.

Fokko, can we step back a little bit and give us a sense of where the demand is today? Are your end customers still struggling with excess inventory, are they running through their inventories, what does the demand profile look like just in terms of end markets and how that relates to you as you look to the rest of the year?

Frankly, I don't have full insight of the end markets of our customers. Of course it's a very diverse group and they go from Taiwan to China, Europe and Korea, so it is a wide group. You can't give just one single answer, but where we see at this moment the growth in production again is of course if you put back to 100% capacity, I have to assume that their inventory level is relatively low. So, it's not going to increase to 100% with a high inventory and most of that is what we can see is the tier ones in China and Taiwan. That could be not across the board, it's not the tier two, three; some of them may do very well, but it's not one single answer I can give to that.

It appears at least there seems to be a sense that some of the larger guys are expecting some bounce back in order activity as they look to the rest of the year. Maybe more so in the second half, there's been discussion about how polysilicon prices have bottomed out and that could be an indicator that things could potentially start to pick up. I guess the question related to that would be if that were indeed the case, when do you start to see equipment orders start to trickle down to you guys? Is this something that would be concurrent or do you expect a lag in terms of when you will start to see something from those guys?

Well, first of all, as I mentioned, there are people that are looking for expansions also on the shorter term - not huge expansions but some of them are not necessarily related to market if you have larger government companies, they may not necessarily follow the market or larger companies with their own plans. And you see, for the general expansions I would not expect it to happen before the middle of the year, but for technology purchases, meaning that could have a longer time to get started. It's something that also could happen in this first half.

You mentioned China and the potential for some pick up in demand over there, what's your read on Europe, do you expect that some of the subsidy cutbacks and the feed in tariffs and stuff could make China more the growth driver for the solar sector or do you see a snap back in Europe?

Well, for me to fully understand where the European feed in tariff is going to go, there is of course rumors about what happens in Germany, but in general, we can say that the financial situations of governments in Europe isn't all that great at this moment and they're asking even China for backup. So spending a whole lot on feed in tariff more than they've done so far, especially in the south of Europe with Italy and not having such an easy time, I do not expect that the growth will come from Europe. If we would get somewhere close to last year, I think we should be happy.

But China is different, I think because growth drivers for this year and maybe even next year will be China. But again, the situation around the Euro has to clear up before we can get a bit of better view what's going to happen in the summer or in the autumn here in Europe. So the smoke about [freeze] in the Euro will have to go away before we get a better vision on that.

Thank you so much. Good luck.

(Operator Instructions) Mark Miller, Noble Financial Group.

Just wondering, you had a rather significant drop in cash this quarter. Some of that was due to payments to the shareholders at Kingstone Technology and about half of it was from operations. Do you envision a lower drop in cash next quarter or are there more payments coming to Kingstone?

There's no more payments going to the Kingstone shareholders. From an operations standpoint, we continue to invest in the R&D efforts of the solar implant tool through Kingstone, but as far as the payments to shareholders, that was a onetime event that occurred. And as far as predicting, we haven't given any forecast for the cash balance. I'll say this, as I mentioned in the prepared remarks, our focus has been and will continue to be rightsizing our working capital, reducing our inventory. We've done a fairly good job overall with our receivables.

And if you look back and look at the spike we had from a production shipment standpoint and having a significant drop-off, it takes time to reduce the commitments and reduce the inflow of inventory so that you can start to reduce that inventory. I liken it to a supertanker; it takes a couple of miles for it to turn. So it takes a couple of quarters for that to work. So as I said, our goal is to get that rightsized during this fiscal year and we've made good progress, not necessarily reflected in the inventory levels at the end of December, but if you look at the purchase commitment reduction, we've made significant progress and we'll continue to focus on that in the coming quarters.

Since it's more new technology related, do you expect that orders and sales for N-type furnaces will pick up in the second half of the year?

We do expect bookings for that to be really picking up in second half of the year; not much before that, but bookings in the second half of this calendar year will give sales and shipments some time in the first half of next year. Because technology takes a bit more than just the equipment; it also needs the technology transfer so that will take some extra time.

Ty Lilja, Feltl and Company.

I was wondering if you could comment a bit about the outlook for your semiconductor business for the rest of the year?

Well, the semiconductor business looks reasonably well. The growth that we've seen in the first quarter I can't exactly goes to the rest of the year but it is reasonable position there. So it is quite stable.

You mentioned that you're going to have your cost cuts finished by April 1st; I was wondering, does that mean another step down in G&A next quarter?

Most of those costs are still coming from the manufacturing side, the labor pool. That's where we'll see this benefit.

Also just wondering what you can say about the type of acquisitions you're looking at potentially and obviously it's hard to tell exactly when something like that would come together, but do you under ideal circumstances, how quickly do you think you could make a major acquisition?

Acquisition cases at hand really are what keeps us very busy, particularly my time and as I indicated earlier, we have a very interesting and compelling cases, marketer cases in solar, semiconductor, also LED. We are looking into LED and also semiconductor in interest of further diversifying our business portfolio between solar and non-solar. And so I do looking at the cases, handful of cases and really feel good about possibility of getting one deal done within this year and continue diligently working toward that.

Howard Halpern, Taglich Brothers.

I guess following up on the acquisition potential question, is it going to be - are you aiming at a revenue generating company or something that you're going to have to develop further to take it to generating revenue?

We are looking at revenue generating acquisitions that has strategic synergies to our existing operations.

In terms of the ion implant that you're going to introduce in May, how quickly do you anticipate after that introduction that you might see the first bookings or orders for that technology?

That's always difficult to predict, but we do expect orders for that within this year. The exact timing, May to the end of the year is still several months to go and the total plan we had was up to two years for the total development and that would still give us a year. But, we do see some good possibilities for some time in the late part of this year but a lot of work still has to be done.

So at the earliest, we would see revenues some time in fiscal '13 then?

Yes.

And for Brad, in terms of the last cycle and the next future cycle, have you made structural changes when we have this next up-cycle that you'll see even greater leverage cost wise than we saw in that previous cycle?

Well, let's first say I think we did pretty well with the last cycle for the profitability and leveraging standpoint so we raised the bar pretty high for the next cycle. So, I think the way to look at it is strategically we went into last cycle with really on the solar side, one product, the solar diffusion system and our expectation is to capture more market share in more of the market with multiple products. So you're going to have a higher base of cost to start out with but hopefully we'll see the benefit of that by getting larger orders when that expansion cycle occurs and/or technology buys occur. So, structurally, I think we've grown from an infrastructure standpoint but we've done that purposefully to support a multi product solar and non-solar portfolio.

(Operator Instructions) Erin Chu, Maxim Group.

Fokko, congrats on ascending to the new role. Just a broader question about the market dynamics if I may and this may be somewhat impossible to answer but it'd be great to get your overall views and impression anyway. It seems like there's really two major factors or trends I should say, affecting the solar industry. One is obviously capacity and the other on a brighter note is just a growing focus on higher efficiency products. So I'm just wondering, can you speak broadly just the impact both of those drivers is having on your outlook for '12, maybe even into '13?

In other words, is the real hang-up right now with your customers or even prospects simply over-capacity, just that in and of itself and supply and demand has to really tighten up before you think orders come in, or is the trend towards higher efficiency product actually leading to greater interest in maybe some of the end type orders even with the state of over-capacity? And any broad light you can shed on that would be appreciated.

Well first of all, to answer the question in general it is capacity so if there is a high capacity available and a little demand, people of course are reluctant to further increase that production capacity. So if you look on the broader base, yes correct, it would have to wait until capacity of that customer base needs to increase. So that does not mean that we have to be at a 50 gigawatt demand before we see increases. Some of the customers may get more orders than they can handle today and these might still do capacity expansions, but that is limited. And it's not going to be like a year or so ago.

Now, if you want to get into the market and of course even though there is a large over-capacity for cell production, still people - there will still be new entrances and still expansions for new technology. And will you get the booming like a few years ago? No, but there is still a definite interest on the existing customer base that see that they need to go to a higher efficiency and also new entrants that want to start with a technology that at least gives them a couple of years of further growth also and that efficiency.

So, stepping on a wagon that's already on the ceiling, meaning it will not go over 19.5 or 20 that is something that is less interesting than where you have a 20-plus capability. So yes, it's a combination. Capacity expansions will happen and higher efficiency is not going to be gigawatts to start with but there will be definitely several that will start in that and also is reasonable in size, after the very small lines.

One quick follow-up then. Could you maybe discuss the potential end type upgrade opportunity in greater detail and maybe just offer some general insight into the economics of an upgrade? Like exactly what does it take for a customer to do that from some older P-type equipment and how does an upgrade investment compare to one for new equipment?

Well, there is a large part of the existing line that can be used, so I would say 60% of the line can be used and some equipment has to be added. But there, the biggest step for people is to go from one technology to the other, from P to N and that itself, is of course a major step, whereas adding equipment to an existing line is easier than going to the complete new technology, meaning different type of wafer. So if 60% can be used and about 40% would be new, assuming it is a line that is of a good quality with of course our equipment already in there.

And I assume it's safe to assume that when you do that the whole line has to shut down for a brief period at least?

That would shut down for a while, yes.

Mark Miller, Noble Financial Group.

Just wondering what you're expecting for your tax situation? You had a benefit last quarter and is that going to be similar in the quarters ahead?

As we had a small loss position, the closer you get to the breakeven, the more dramatic our permanent differences and other aspects that affect your tax rate. So it could be a little volatile as we go forward. And part of that's because also our China operations primarily Kingstone, which is developing our solar ion implant, is incurring losses as relates to its research and development. Those losses are not consolidated into our US tax return; therefore the benefits of that loss are currently not being recognized in our financials. Our expectations are that Kingstone itself will be profitable, will have sales in the future and therefore be able to utilize those losses. In the meantime, we do not get the benefit of those losses reflected in our GAAP financials.

On your noncontrolling interest, is that part of your noncontrolling interest, the loss this quarter - I'm sorry, the income this quarter it looks like?

Yes, it looks a little funky in there, but just to explain, US accounting rules require you when you have a controlling interest, to consolidate 100% of the assets, the liabilities, the income and expenses and on the P&L to back out the minority interest of that income or loss. Well since we're in a loss position, we're consolidating 100% of the loss, we have to add back call it 40% or so loss that is the minority interest loss. So it almost looks like income that's reducing the loss attributable to Amtech Systems.

Would you expect it to be similar in the quarters ahead to what you saw in the December quarter?

Well we didn't give any specifics which relates to that piece of it, but we did say in our outlook that we expect our research and development costs to be significantly higher in the March quarter. Well that relates primarily to that minority interest, so the add back we would expect then to be a little bit higher too.

Gordon Johnson, Axiom Capital Management.

I guess my question just centers on the possibility of order cancellations next quarter. As I look at your incremental orders over the past couple of quarters, I notice that the number of incremental orders versus total orders you're reporting has fallen. I guess the point is, your incremental orders are less than the total orders you're reporting by 3.1 times and 1.4 times in Q4 and Q1 fiscal of '11 and '12, whereas those numbers were below 1 times for the past three quarters. So as I look to what looks like a pretty significant increase in your days sales outstanding jumping from 68 days to 122 days and your days of inventory jumping from 84 days to 192 days, which looks like an all time record, is there a risk of incremental order cancellations in the next fiscal quarter?

First of all, we can talk offline. I think I dispute a little bit your calculation on your DSOs but we can do that offline here as far as that calculation is concerned. As relates to order cancellations, backlog, I think we put this in the press release; you have to take into account that there is foreign exchange. When the Euro is weakened, therefore we usually see some loss or reduction in the backlog and I think it's about $3 million at the end of December related to foreign exchange loss. Now we've had gains in the past and when the Euro spiked them. But last quarter it was a $3 million loss.

And as far as order cancellations are concerned, we haven't had any cancellations of any major significance. We did take out of our backlog, but this was at the end of September, I want to say maybe $5 million or $6 million that was pushed out beyond 12 months. And we always evaluate that every quarter.

And I know that someone asked the question around acquisition opportunities. You guys mentioned that that seems like something that could be a significant positive in the future. Can you provide some more color on exactly what you're looking at with respect to acquisitions and again, when we could start to see that be accretive?

On the solar and semi and LED, I'll cover solar first. The concentration in our effort is to first efficiency gain on new technology that will reduce [costable] productions noticeably. That's where our focus is. And as to the LED, this is a new - we will be new entrant promoting the machine opposed to consumable (inaudible) we are currently doing well. Consumable (inaudible) so gives us marketing pipelines and throughout the LED industry, however, the volume of (inaudible) consumable doesn't really create a large revenue volume. And so we are looking into opportunities for machine entry into LED.

As to the semi, we are looking at increasing the size of operations where we have market synergies. As to the manufacturing synergies and as well as marketing synergies. So those are the items that we are working with.

Okay, so it seems you guys are moving some of the way from solar which just given the current industry dynamic, it seems like a very positive development. Would that be accurate?

That is accurate. Opposed to solar, our semi operations has been rather quiet for several years and we really like to make a meaningful [respective] the operation out of a non-solar business unit and so I am as seriously looking into non-solar opportunity as well as the solar opportunities.

That just brings me to my last question. Looking at the OpEx, clearly you guys are investing to ramp out the ion implant opportunity. How long, Brad, should we think about this OpEx thing at these levels? Will we start to see it fall this year or will that extend into next fiscal year?

I think if you look at the plan and the plan has been an 18-24 month plan, I expect to see that peak in this year and then starting to drop off next fiscal year as relates to the ion implant development.

Okay, so we expect to see OpEx kind of tick up through this fiscal year and then start to tick down in fiscal 2013?

Right.

Thanks a lot gentlemen and I look forward to you executing on your new strategy.

This concludes our question and answer session. I'd like to turn the conference back over to Brad Anderson for any closing remarks.

Thank you very much for joining us today. We look forward to reporting to you again on our progress and appreciate your continued interest in Amtech. I'll be available for any questions you may have and welcome your follow-up calls. This concludes today's call.

The conference is now concluded and we thank you for attending today's presentation. You may now disconnect your lines.