Amtech Systems Inc (ASYS) 2014 Q3 法說會逐字稿

Good afternoon and welcome to the Amtech Systems third-quarter 2014 financial results conference call. (Operator Instructions). Please note this event is being recorded.

I would now like to turn the conference over to Brent Anderson, Chief Financial Officer, please go ahead.

Thank you. Good afternoon and thank you for joining us for Amtech Systems third-quarter fiscal 2014 results conference call.

On the call today are J.S. Whang, Amtech's Executive Chairman; Fokko Pentinga, our President and Chief Executive Officer; and myself, Brad Anderson, Chief Financial Officer.

After the close of trading today Amtech released its financial results for the third quarter fiscal 2014 ending June 30, 2014. That earnings 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 our products; the effect of changing worldwide political and economic conditions including government-funded solar initiatives and trade sanctions; the effect of overall market conditions including the equity and credit markets and market acceptance risks. Other risk factors are detailed in our Securities and Exchange Commission filings including our Form 10-K and Forms 10-Q.

J.S. Whang, our Executive Chairman, will start our discussion today. Fokko Pentinga, Our President and Chief Executive Officer, will update you on progress made in our third quarter and I will then discuss third-quarter fiscal 2014 financial results.

So I will now turn the call over to J.S. Whang, our Executive Chairman, to begin the discussion.

Thank you, Brad. Good afternoon. We appreciate you joining us today to discuss our Q3 results and the progress being made in our marketplace. Fokko and Brad will update you on the current selling environment, new orders we received, shipments that we made to key customers and important progress made by our technology research and development team and partnerships.

Let me step back in time for a moment. During the downturn, we aligned our organization with a market that was affected by many negative forces. We operated through a time where the pullback in demand for our product was very severe. However, we put in place the plans to successfully preserve cash and implement new business practices. That together ensured our resiliency and positioned us to move forward successfully.

Our primary objective was to ensure we would be prepared for the eventual solar capacity ramp up and capital spending on next-generation technologies. With our never-ending attention on future opportunities, our entire team is diligently focused on our customers near- and longer-term objectives and bringing our new offerings to the expanding solar market.

So as planned, we are now seeing the benefits of our actions. We have brought new technologies to the marketplace such as our ion implant technology system. We have doubled the size of the market we serve as the result of introducing our PECVD technology to the marketplace. We are being recognized by solar cell manufacturers not only in China but also in Korea, Taiwan and the US and other markets around the world. Solar is a global opportunity today and for the long-term. We are happy to say that we are very well positioned for next solar capacity expansion cycle and demand for next-generation technologies.

Now Fokko will update you with more details. Fokko?

Thank you, J.S. In our first and second quarter earnings calls, we indicated that we were expecting that the second half of 2014 would show visible progress in the marketplace and it would likely translate to positive developments for Amtech Systems and it has. We are excited to report on several progress points today.

First, our year-to-date bookings of $50 million including $29 million in solar orders is a significant step in the right direction. Those orders bring our June 30 backlog to $39.4 million with solar backlog at $30.6 million. These backlog levels represent a 37% and a 59% increase over the total and the solar backlog at the end of the third quarter of 2013.

As J.S. mentioned, we have made progress on many fronts. We have engaged with new customers in new geographies and we are not only introducing but we are also delivering our new technology solutions to industry-leading customers.

In the third quarter we shipped our new high density high throughput fusion systems to a customer in Taiwan and we shipped PECVD systems to Korea and our N-type cell line which we were installing in San Antonio when we talked with you in May is now ramping up and we are working towards achieving key milestones in the very near future.

We are also very pleased to announce today that we have received our first production order for our IonSolar Implant system. We currently plan to ship that system within the next six months. Another progress point with respect to our ion implant technology is that a system which shipped to ECN, the Energy Research Center of the Netherlands, is now installed and the joint development efforts for high efficiency cell technology are underway.

Based on conversations with our current and prospective customers, we believe that what we are seeing in this improving 2014 environment strongly signals the long-awaited shift towards a more active spending environment. Customers are definitely looking at capacity relative to their 2015 and longer-term objectives. We are fully engaged and our technology and manufacturing teams are ready to address their specific need.

I will now turn the call over to Brad to discuss our fiscal third-quarter results. Brad?

Thanks, Fokko. Our total customer orders in the third quarter of fiscal 2014 were $17.9 million including $12.3 million of solar. This compares to $21.5 million, which had $13.6 million of solar in it in the preceding quarter and $20.7 million in the third quarter of fiscal 2013. Our shipments for the quarter were $14.6 million including $7.3 million of solar shipments resulting in an overall book to bill ratio of 1.2 to 1 with solar at 1.7 to 1.

Net revenue for the third quarter of fiscal 2014 was $9.2 million compared to $12.7 million in the preceding quarter and $10.4 million in the third quarter of fiscal 2013. The decrease is due primarily to the high level of revenue deferred in the latest quarter of approximately $5.4 million resulting from the shipment of new products including our PECVD and ion implant equipment.

At June 30, 2014, our total order backlog was $39.4 million, an increase of 27% compared to total backlog of $31 million at March 31, 2014. Our backlog at June 30, 2014 includes $30.6 million in solar orders and deferred revenue, a 49% increase compared to solar backlog of $20.5 million at March 31, 2014. As a reminder, backlog includes deferred revenue and customer orders that are expected to ship within the next 12 months.

Gross margin in the third quarter of fiscal 2014 was 18% compared to 23% in the previous quarter and compared to negative margins in the third quarter of fiscal of 2013. The lower margin sequentially resulted primarily from higher profit deferrals in the most recent quarter. Negative margins in the third quarter of fiscal 2013 a year ago resulted primarily from inventory write-downs.

Our SG&A expense in the third quarter of fiscal 2014 was $4.1 million compared to $5.4 million in the third quarter of fiscal 2013. The decrease is primarily due to lower stock-based compensation expense. SG&A includes $200,000 of stock compensation expense in the third quarter of fiscal 2014 compared to $1.6 million of stock-based compensation expense in the third quarter of fiscal 2013.

Research and development expense was $1.4 million in the third quarter of fiscal 2014 compared to $1.9 million in the third quarter of fiscal 2013. The lower R&D expense is primarily due to the recognition of a significant amount of government grant funding during the third quarter of fiscal 2014. Partially offsetting the higher grant recognition was increased spending resulting from higher activity and the development of equipment for the solar industry, as well as higher activity and development of additional markets for the ion implant technology.

Depreciation and amortization in the third quarter of fiscal 2014 was $591,000 compared to $632,000 in the third quarter a year ago. Income tax expense in the third quarter of fiscal 2014 and 2013 was $1.3 million and $2.6 million respectively. A provision was required due to the effect of book tax differences and valuation allowances on net operating losses in certain tax jurisdictions in which we operate.

Net loss for the third quarter of fiscal 2014 was $5.3 million or $0.53 per share compared to a net loss for the third quarter of fiscal 2013 of $12.1 million or $1.27 per share. Total revenue by geographic region for the fiscal third quarter was the North America region at 19%, Asia-Pacific region at 46%, and Europe at 35%.

Our financial position remained strong at June 30 with essentially no debt and total unrestricted cash and cash equivalents of $31.6 million compared to $36.6 million at March 31, 2014. The decrease in cash is due primarily to investments in new products and operating losses during the quarter. At June 30, 2014, we had working capital of approximately $36 million.

As you look at our business for the nine months ended June 30, 2014, we had customer orders of $50 million, up 43% including $29 million of solar, up 37% compared to the same period a year ago. Shipments were $52 million with solar at $29 million resulting in a book-to-bill ratio of 1 to 1 overall and for solar. Net revenue was $37 million and that is net of approximately $15 million of deferred revenue but is still up 32% from the same period a year ago.

This concludes the prepared remarks of our conference call. Operator, would you please open the call for questions?

(Operator Instructions). Sven Eenmaa, Stifel.

Thanks for taking my questions. First, I wanted to ask now that the trade case is behind at least in a preliminary stage, how is that impacting the visibility your clients have in terms of capital spending?

I will take it first, Sven. It is starting to help clarify. I think they are still readjusting to the different geographies in which they operate and I think overall what we look at is the increase in demand globally and how that is in relation to the capacity globally. And I think that is why we continue to talk about 2015, we see an overall improvement because of that narrowing of the gap between demand and capacity.

But in terms of internal planning, how do you think about your order expectation timing here? Do you expect them in the fourth quarter this year? Do you expect orders to become more in the first quarter next year? How should we think about that?

In general looking at it from a quarter to quarter is always a difficult proposition because while there are plans, when they push the button to execute on those plans is always -- could be a moving target. But generally what we have said in our prepared remarks and I think we've been pretty consistent over the last little while is 2014 was kind of a precursor to some opportunities here and there to more of a general upturn in 2015.

The timing of the orders is always difficult but our expectations are to, first of all, we fully participated in the 2014 opportunity and really expect the greater improvement to come in 2015. Timing exactly when the orders come in is difficult.

Got it. And then congratulations on that ion implant order. Are there any metrics around the size of order, the capacity contemplated you could provide?

As it relates to the ion implant, the amount of megawatts that an ion implant is close to say 40 -- 45 MW. It really depends on the type of cell technology they are using that line for. So if you get to higher efficiency N-type, then you go a little bit higher. If you are using it for a P-Mono, then it is going to be a little bit lower.

Got it. And a couple of accounting or financial related questions here. First, you mentioned the gross margin in the quarter and I understand some of the revenues are deferred. But if you would look at the margin on the shipments in the quarter, what would that have been?

When you look at that and try to peel away a little bit of the deferrals that unfortunately were required to do for US GAAP, with the low volume -- so you get an underutilization of factory, you are going to see lower margins but that would be more in the call it mid -- lower to mid 20s.

Got it. That is very helpful. The last question I have is do you recognize any revenues on that PECVD systems which are currently on the field and in the installation process?

We have not.

Got it. Thanks very much.

(Operator Instructions). Mark Miller, Noble Financial Capital Market.

Good afternoon. Just was wondering in terms of what is going on with the implanters. Besides this order you just received from a Chinese customer, could you give us kind of a feeling where else you are engaged? Are you running wafers? Are you shipping beta site tools? Any progress noted by your competitors in this area?

We are shipping more beta tools. We are not really looking for orders. Giving beta tools away is not what we generally like to do. The machine is now in the stage that that is not necessary anymore. So that is why we also emphasized it was a production order. It was not just a giveaway thing.

So where will you see it most? Our own technology is mostly geared towards N-type to take advantage when using ion implant on N-type cells. So that is where most of the technology will go and it's where we believe the biggest demand is. Yes, of course, we are running demo wafers for different customers. That is an ongoing activity.

As to competitors, normally I don't discuss much about them. There are a few competitors in this business and we know there is one very important big competitor and they will always continue to do well not that I see a lot of orders out for them either but I don't know the details of what they do get and don't get. But that's what we consider as our real competitors.

Other than that, I think our machine has been doing very well and the fact that we are getting orders, production orders in China, but also working with ECN gives us very strong confidence but of course that's also what we see in our own process development and in the machine's performance (inaudible).

Throughout your history I believe you shipped several thousand of furnaces and I'm just wondering as these tools replace furnaces in the next-generation of cell production, what type of TAM are we looking at? Are we looking at roughly 1000, 2000 possible units for the whole industry?

If we look over a century, that may be the case but I mean these are tools that first of all, the idea that they replace a furnace that is partly true. They do replace part of it but after an ion implant you still need to do so an anneal step, so the number of furnaces will not necessarily change. It is just a different way but it has big advantages because it's directional. Would we expect that in the world there are several thousands of diffusion furnaces that would now in the future would be several thousands and ion implanter? Of course I don't know how long (inaudible) look at but that is not something that we are not looking at those numbers at all (inaudible).

How are you balancing next-generation high efficiency production line? Is it 1 to 1 between furnaces now and implanters?

It depends a little bit on what it is used for. If you do both, if you take an anti-technology. If you do both a phosphorus and a boron with implanter, then it is sort of a one-on-one. If it's a technology where you still use the boron diffusion and the implant for the phosphorus, then you still have quite a few more furnaces than you have implanters.

One of your primary customers has experienced some capital constraint, that's Yingli. Any visibility of when that improves or how that might impact you in the future?

For us it is always difficult to comment on the financial situation of our customer but we have seen Yingli improved a lot in the last quarter and I personally think that this quarter they will see also further improvements. But then again, we have to wait to see what they come up with.

But most customers do see improvements quarter over quarter and that will have very positive effect. And if the customers would have been in very good financial shape -- all of them, we would have already seen a big increase in capacity but most of them have had some difficulties over the last years and that slowed them down a bit. But it is also good for everybody because now I think the recovery will be more controlled rather than getting a big upswing and then half a year later on going down again.

So we are very confident that our customers and also our best customer will start to continue to do better and have already done and in the near future will continue to do so and that will have positive effects on our possibilities to sell more equipment over the next couple of quarters.

Are you seeing healthy quoting activity from your major customers?

Yes, we see good quoting activity but it's not something that is comparable to the boom of a couple of years ago. People are still being careful about how to spend and how to increase and not overreact. So that's good for all of us.

It is healthier from where it was.

It is a lot better now.

Six to 12 months ago.

Sure. Thank you very much.

(Operator Instructions). There are no further questions. This concludes our question-and-answer session. I would like to turn the conference back over to Brad Anderson for any closing remarks.

Thank you for your time today and for your continued interest in Amtech. This concludes today's call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.