Amtech Systems Inc (ASYS) 2015 Q1 法說會逐字稿

Greetings. All participants will be in a listen-only mode. (Operator Instructions). After today's presentation there will be an opportunity to ask questions. (Operator Instructions). Please note this event is being recorded. I would now like to turn the conference over to Mr. Brad Anderson, Amtech's Chief Financial Officer. Please go ahead.

Thank you, Andrew. It afternoon and thank you for joining us for Amtech Systems fiscal year 2015 first-quarter 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 first quarter of fiscal 2015, ending December 31, [2015]. The 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 Security 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 strategic progress made in our first fiscal quarter. And I will then discuss the quarterly financial results and outlook. I will now turn the call over to J.S. Whang, our Executive Chairman, to begin the discussion.

Thank you, Brad. Thank you for joining us today as we discuss Amtech's fiscal Q1 2015 financial results. For those of you who have joined us before, we thank you for your ongoing interest in Amtech. We are also excited to welcome those who became Amtech shareholders on Friday of last week, when we closed on our acquisition of BTU International.

We have meaningfully increased the breadth of our product portfolio and have further diversified Amtech's market exposure through our acquisition and innovation strategy over many years. We continue that same strategy with the combination of Amtech and BTU International. The joining of this force positions us very well for an exciting future and long-term profitable growth. Together, we have a robust portfolio of key technologies and products with both strong semi and solar business platforms and greater potential for a more consistent cash flow stream, which further strengthens our ability to support Amtech's solar growth opportunities.

So before I turn the discussion over to Fokko, as noted, I want to welcome our new shareholders and the leadership and talent throughout the BTU. We are stronger together, and I look forward to enjoying many successes as the result of the combination of the two market-leading companies now ready to capitalize on our organizational strength and global opportunities. Fokko will now discuss what is happening in the marketplace and Amtech's go-forward plan for our now bigger and even more exciting Company. Fokko?

Thank you, J.S. I, too, would like to welcome our new employees and shareholders to today's call. And to those of you who have joined us in the past, we look forward to telling you about our progress since our last call. As J.S. said, we are excited to have announced that we have closed on the acquisition of BTU International. We have a good integration plan already underway and expect a smooth process. We now have greater scale and expect to benefit from the synergies we have previously discussed. We are excited about the combination of Amtech and BTU, as it expands our technology portfolio and gives us a broader end-market diversification and enhances our financial profile to support our growth strengths.

We're also very excited about our investment in SoLayTec, which provides a state-of-the-art technology for high-efficiency solar cell solutions including PERC. SoLayTec's ultrafast ALD -- and ALD stands for atomic layer deposition -- is a key component and combined with the Tempress PECVD systems provide a very competitive solution for backside field passivation to solar cell manufacturers.

Although we generally don't comment about stock price, it seems that solar stock have come under pressure as oil and gas commodity prices have fallen. It's important to understand that we don't see lower fossil fuel prices as a risk for renewables. More specifically, it is clear solar is a very key component within the world's energy mix and to geopolitical agendas. Countries across the globe are focused on the longer-term need for clean energy alternatives and forecast for solar to grow at a very fast pace in the coming years. We remain very encouraged by our customers' ongoing high level of interest in and the broad support for the next generation continuously advancing solar solutions.

Now back to Amtech's first quarter -- as in prior quarters, we again saw progress. Customer orders totaled $30 million, including $20 million of solar orders. And in the months of January we added another $12 million to the order book, bringing our fiscal year-to-date orders to a healthy $42 million. Although capacity expansions are still somewhat selective, we are definitely seeing interest in both expansions and the upgrades of production lines.

In 2015, we look for more of the same in what I would describe as an environment providing incremental improvements and clear progress. In 2015 we will continue to invest in R&D and our ongoing product developments. We will further collaborate with our research partners and our current and prospective market leading customers to advance solar cell technologies and bring higher efficiency, lower cost of total ownership, next-generation technologies to the [solar] marketplace. We are excited about the Company's future and our potential to sustain our leadership in our key technologies and grow our market share in our now broader product portfolios.

I will now turn the call over to Brad to discuss the first quarter's results. Brad.

Thanks, Fokko. Net revenue for the first quarter of fiscal 2015 was $12.4 million compared to $19.8 million in the preceding quarter and $14.8 million in the first quarter of fiscal 2014. Sequentially, the decrease is due to lower recognition of previously deferred revenue. The decrease compared to Q1 fiscal year a year ago is due primarily to lower shipments to the semiconductor industry.

Our total customer orders in the first quarter of fiscal 2015, as Fokko mentioned, were $30 million, including $21.1 million of which was solar, up from total orders of $11.2 million in the fourth quarter of fiscal 2014. This also compares to total orders of $9.8 million in the first quarter of fiscal 2014.

At December 31, 2014, our total order backlog was $48.3 million compared to $28.5 million at September 30, 2014. Our total backlog at December 31, 2014, includes $37.5 million in solar orders in deferred revenue compared to solar backlog of $20.9 million at September 30, 2014.

Foreign-exchange caused a $1.3 million decrease in our backlog in the December quarter due to the weakening of the euro versus the US dollar. Backlog includes deferred revenue and customer orders that are expected to ship within the next 12 months. Gross margin in the first quarter of fiscal 2015 was 28% compared to 13% in the fourth quarter of fiscal 2014 and 31% in the first quarter of fiscal 2014.

Margins improved sequentially because the margins in the fourth quarter of fiscal 2014 reflected recognition of lower-margin products as well as lower shipment volume. The slightly lower margins compared to a year ago resulted primarily from lower levels of solar and semiconductor shipments, partially offset by recognition of some previously deferred profit and utilization of previously written-down inventory.

Our SG&A expenses in the first quarter of fiscal 2015 were $6.4 million compared to $4.9 million the previous quarter and $4.1 million in the first quarter a year ago. The increases result primarily from expenses related to activity leading to the acquisition of BTU International and SoLayTec as well as increased commission expense resulting from higher commission rates on certain sales.

Research and development expense was sequentially flat at $1.8 million in the first quarter of fiscal 2015 and in the preceding quarter. This compared to $900,000 in the first quarter of fiscal 2014. The higher R&D expense versus a year ago is primarily due to a decrease in the recognition of government grant funding.

Depreciation and amortization the first quarter of fiscal 2015 was $705,000 compared to $613,000 in the preceding quarter and $623,000 in the first quarter of fiscal 2014. Included in the first quarter of fiscal 2015 results is $232,000 of stock option expense compared to $192,000 in the preceding quarter and $176,000 in the fiscal first quarter year ago.

Income tax expense in the first quarter of fiscal 2015 was $180,000 compared to a tax benefit of $645,000 in the fourth quarter of fiscal 2014 and tax expense of $560,000 in the first quarter of fiscal 2014. Despite the pretax loss for the quarter, we recognized tax expense due primarily to losses in tax jurisdictions where we cannot recognize tax benefits. The net loss for the first quarter of fiscal 2015 was $5.2 million or $0.53 per share compared to a net loss of $3.2 million or $0.33 per share for the fourth quarter of fiscal 2014. The net loss for the first quarter a year ago was $800,000 or $0.08 per share.

Total revenue by geographic region for the first quarter was North America region 23%, Asia-Pacific region 51%, and Europe at 26%. Our financial position remains strong with total unrestricted cash and cash equivalents of $28.6 million compared to $27.4 million at September 30, 2014. At December 31, 2014 we also had working capital of approximately $24.7 million.

I would now like to take a minute and talk about our outlook for this fiscal year. Due to improved bookings and backlog and the recent acquisition of BTU, we anticipate net revenue for the quarter ending March 31, 2015, to be in the range of $24 million to $26 million. This will include approximately two months of BTU financial results. Gross margin in that quarter is expected to be in the low 20s% range, negatively influenced by anticipated revenue deferrals as revenues ramp up.

Operating margin for the quarter ending March 31, 2015, is expected to be negative but improved from the quarter ended December 31, 2014. For the second half of fiscal 2015, we expect gross margins to migrate to the low 30s% range and to positive operating margins. It is important to note that our operating results could be impacted by the timing of systems shipments and the impact of revenue deferral on those shipments, and recognition of revenue based on customer acceptances, all of which can have a significant effect on operating results. Operating results could also be significantly impacted by the timing of recognition of government grant revenue related to research and development projects in China and the Netherlands.

A substantial portion of our revenues are denominated in euros. The revenue outlook provided in this press release 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 United States dollar could cause actual revenues to be lower than anticipated.

Finally, I would like to report to you that the integration plan of BTU is progressing well with some items ahead of schedule. We have already started to see labor savings and reiterate our guidance of $4 million to $5 million of overall cost savings within 12 months post closing.

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

(Operator Instructions) Sven Eenmaa from Stifel.

Thanks for taking my question, and congratulations on a nice start of the year with the closing of the deal and the new orders. My first question was, in terms of now that you've seen a lot of the trade case-related uncertainty moving into the past and the picture, the dust should be clearing here a little bit, what are your customers thinking in terms of capacity expansion as they go into 2015?

Sven, are you referring to the -- when you said trade cases, right, the --

Yes.

Okay.

Yes, I'm talking about solar side, obviously.

Like we said, it's still very selective. But also some of our customers are selective in where they are doing these expansions. And we, indeed, see more interest not only there but also activity to build production capacity outside of China in order not to be restricted in their sales to the US and Europe. And that is something that is really happening now. Last year there was more talk and now it's really going into action.

If you see the amount of capacity expansion, the volume -- that's hard to give a good answer on because it's a combination of expansion and improvements of capacity. So if you have a capacity that's not really giving sufficient efficiency and you basically built for inventory that you can't sell anymore, that expansion, by increasing that efficiency really is more important than expanding for that customer. So it's really that mix.

Right, that's encouraging. And now in terms of the BTU side, could you quantify how much of that revenue guidance that you provided for the first quarter is going to be BTU?

Sven, if we look at what we see from BTU, I think historical recent history for them as far as on the revenue side is pretty consistent with what we looked at going through up until the closing. I think looking historically is pretty consistent.

Got it. And in terms of when you discuss the gross margins moving above the 30% level, what is the assumed mix there between -- obviously, you have reflow in the broader semi portfolio versus the solar.

Well, you can see by our backlog that we have put in, we have, I think, over $30 million in solar backlog that will be coming through in the next several quarters. So it will be a healthy mix of both that and the reflow business and other thermal products that BTU provides. So it's a healthy mix of both.

Very good. And the last question I just wanted to ask, on BTU side, is what is the balance sheet impact here? How much of that and how much cash will they contribute on a pro forma basis?

Well, their debt is primarily just the mortgage on the building, which was in the $7.5 million range. And then cash was in the, call it, high single digits, about $9 million with of cash.

Got it. Thank you very much.

Mark Miller of Noble Financial Capital Markets.

But let me add my congratulations on your orders. I'd just like to pursue a little bit more just for trying to plan about margins, in terms of your backlog is it possible to give some feeling for the makeup of the backlog in terms of implant, PVD, and furnaces right now? Is it more furnace than PVD and implant or roughly equal ratios?

Sure, Mark. It's probably within the -- between diffusion furnaces and PECVD, it's a little bit heavier to diffusion and then more -- then you have got quite a bit of some PECVD and then the smallest part of the backlog will be the ion implant.

And am I correct in saying that the furnace margins are higher than the other two tools?

Just because of the other two tools being new, especially the ion implant. This is one of our -- beginning of some production tools. So the efficiency of production for the diffusion furnaces would be better than their PECVD and ion implant. So, it's a correct assumption.

Can you give us -- I know it's something, that's one of the implants. But how is the ramp going towards high-efficiency n-Type? Is that progressing, as you believe? And can you give an estimate by the end of this year what percentage of modules will be the high-efficiency n-Type? I assume it's low.

Well, I wouldn't be able to give you the last one saying how much percent of the panels would be in the n-Type. But what is definitely to be seen is that more and more customers are moving to n-Type, not changing their complete production but changing one line after another to n-Type and start building also not only the product but also the market for it. And so, last year we saw very few moving over -- well, last year more than in 2013. But it now really starts to move over to go to n-Type. But it's not that you see gigawatts all of a sudden change. It's a few lines here, a few lines there. But quite a few are starting production.

And for the remainder of this year, your tax liability -- I assume that will be a low single-digit percent?

Yes. There are some discrete tax items you always have to deal with. But it depends on where you are at from a profitability standpoint, and that could have a significant impact on your effective tax rate. But to the extent we start turning and generating income in loss jurisdictions, that will start to benefit us.

And then finally, you mentioned there was an exchange impact on the backlog. Were there any other significant impacts you to exchange rate changes on your results?

Just overall are Tempress and R2D operations, so our European operations have both revenues and essentially all costs in euros. So we don't have really much exposure from a P&L standpoint. It's just as the euro weakens against the dollar that will just shrink both assets and liabilities, revenues and expenses from those operations. And to the extent the euro strengthens against the dollar, it inflates. But overall, very little, I'll call it, P&L exposure because of any euro exposed without the dollar or dollar exposed without the euro.

Thank you and, once again, congratulations on the progress on the orders.

Mark, thank you.

You're welcome.

(Operator Instructions) Gordon Johnson of Axiom Capital Management.

This is James Bardowski in for Gordon. Congratulations on a pretty decent quarter and good job with the bookings. I just have a couple of follow-up questions, if you will. Do you have any outlook is for is the semiconductor side? I know you mentioned that there was little bit of trouble that it gave you in this most recent quarter.

Yes. I think the trouble you are referring to is just the comparison between that and, I think, a year ago. We had some higher shipments in December quarter a year ago. But that's really just lumpy from time to time. We have a couple of key customers, and to the extent there's more orders in the quarter, shipments, that tends to bring us up or down quarter to quarter. Overall, I'd say are semiconductor business is solid and continues to provide a nice baseline and foundation for our growth plans in solar.

Great. And then real quick, I know you mentioned that for the R&D expense the expiration of government grants primarily led to the increase. Or are there any other grants that are in the pipeline for you? Anything else I can (multiple speakers)?

Sure. Just to clarify, there's a timing with regards to the recognition of grant revenue. We receive the monies and then we have to complete the programs or projects. And then there's a timing of when we recognize those revenues, those funds that have already been received. And there's essentially an accrued liability for those unearned or unrecognized, I should say, grant revenue on our balance sheet. And the timing is we incur some costs but then we don't necessarily record all the revenue that came from the government. So there's some revenue recognition that occurs from time to time that would offset our R&D expense. And that can have an impact on a quarter-to-quarter basis. The bottom line is we've been very conservative on how that has been recognized. So there's still some to be recognized.

And then finally, could you provide any color on your D&A and CapEx expense for the next quarters, particularly in the light of the BTU acquisition?

Can you say that question again?

Just if you could provide any color on your D&A expense as well as CapEx? I know it's small, but nonetheless.

Yes. On the D&A, depreciation and amortization, there's probably, call it, another $500,000, $800,000 of depreciation and amortization that's coming from BTU. CapEx will continue to be low. Incrementally what we are adding there, at least for the rest of this fiscal year, will be relatively small.

Okay, excellent. All right, well, congrats again on the orders, gentlemen. And I'll follow up off-line.

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 interest in Amtech. This concludes today's call.

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