Q1 2020 Earnings Call
Good day and welcome to the mtech systems first quarter 2020 earnings conference call all participants will be in a listen-only mode. So you need assistance. Please email conference specialist by pressing the star key followed by zero after today's presentation. There will be an opportunity to ask questions. Please note that this event is being recorded. I will now like to turn the conference over to Lisa Gibbs Chief Financial Officer, please go ahead ma'am.
Good afternoon, and thank you for joining us for an Tech Systems first quarter of fiscal year 2020 results conference call with me on the call. Today are exact chairman. Michael Wing our chief executive officer and Robert Hass our executive vice president today. I'm Tech released its Financial results for the first quarter of fiscal 2012-13 that earnings release will be posted on the company's website at am teksystems.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.
Statements are not a guarantee 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 way of looking statement are changes in the technology is used by our customers and competitors change and volatility and the demand for our products the effect of changing worldwide political or economic conditions, including trade sanctions the effect of overall market conditions, including the equity and credit markets and Market acceptance risks and our Capital allocation plan with other risk factors are detailed in our Securities and Exchange Commission filings, including our form 10-K and forms 10-q. I will now turn the call over to Robert Hass our executive chef resident Robert. Thank you Lisa on January 28th, 2020. We announced the sale of our shares of tempers group holding BV to an independent wage.
I would like to provide some additional details on the foundation structure and why the sale tempers to the foundation was in the best interest ramtech and our share of the foundation stick teen continuity day temperatures is an independent legal entity formed under Dutch law and created for the sole benefit of the employees customers and suppliers of Tempest. The foundation is governed by an independent board with restructuring expertise and no affiliation with mtac. The foundation is a stand-alone entity with no shareholders Partners or members effective with the closing of the sale of Tempest and taxes. No longer has any financial interest in the future losses or profits of Tempest or the foundation and has no further involvement or connection with a new age.
control over the foundation other than
The right to receive loan repayments upon currents of certain events and receive limited information from the foundation pursuant to the covenants set forth in that loan off the term loan agreement with Tempest.
Our objectives in this in selling Tempest were to stop the losses resulting from our solar operations, which were over ten million dollars in 2019 alone and to dedicate our internal resources to our power semiconductor strategy without the continuing distraction of the solar operations and its losses.
As we stated in the press release we went through a robust sales process with an independent financial adviser that spanned nearly one year and the parties emerged as potential buyers offered terms that were unfavorable to us and most required a law large cash infusion from Amtrak. We evaluated these offers along with other options, which included keeping temperatures and restructure. It ourselves in preparation for another sales attempt down wind it down or selling our temperatures to an independent Foundation where it can go through the restructuring and sales process independent of ametek off keeping temperatures would have required the infusion of more casts resulting in continuation of Management's distraction and the burden of the ongoing losses all while maintaining. Yep.
dead dead dead dead dead.
Uncertainty of whether it could be sold on more.
Acceptable terms in the future winding down tempers would be extremely costly and time-consuming due to the obligations to suppliers and customers insistence to employees required under Dutch law does neither restructuring or winding down Tempest would achieve our objectives in both scenarios. We both continued losses during the restructuring and sale or wind down at the Tempest which on that basis could possibly be higher than what we have recorded for this month while still retaining significant uncertainty and working with our Dutch legal advisers. We closely examine the foundation option. The foundation is a stand-alone entity Incorporated under Dutch law through the filing of a deed of Incorporation.
Thursday
Thursday
Given the unfavorable terms offered by perspective buyers during our own most year-long effort to sell temporus and after considerable review and deliberation management and our board concluded that selling Tempest to an independent foundation for a nominal amount who is the best option for ametek to effectively and efficiently off exit the solar business and focus on its power semiconductor strategy the cash on temperatures balance sheet is primarily customer deposits off the loan provides tempers with the working capital necessary to remain a going concern fulfill orders and give the foundation time to restructure tempers and physician it took an eventual sale.
Thursday
good day and welcome to the mtech systems first quarter 2020 earnings conference call all participants will be in a listen-only mode. So you need assistance. Please email conference specialist by pressing the star key followed by zero after today's presentation. There will be an opportunity to ask questions. Please note that this event is being recorded. I will now like to turn the conference over to Lisa Gibbs Chief Financial Officer, please go ahead ma'am.
Good afternoon, and thank you for joining us for an Tech Systems first quarter of fiscal year 2020 results conference call with me on the call today are off executive chairman. Michael Wang our chief executive officer and Robert Hass our executive vice president today. I'm Tech released its Financial results for the first quarter of fiscal 2020. Earnings release will be posted on the company's website at am teksystems.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 a guarantee 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 customer.
This week tempers met the first milestone.
In the loan agreement and repaid $500,000 bringing the loan balance down to 1 million seven hundred thousand dollars and Tech our management team and our board of directors have no further involvement of any sort and Tempest sale to the foundation allows for the continuation of the business for the name is employees vendors and customers and allows us to now Focus one hundred percent on the opportunities that are ahead and power semiconductor long. Does this Foundation sale accomplishes our objectives, and we believe is in the best interest of shareholders. I will now turn the call over to Joe's swing or executive chairman JS. Thank you Robert. Thank you for joining our call today.
and competitors
Change and volatility and the demand for our products the effect of changing worldwide political and economic conditions including trade sanctions the effect of overall market conditions, including the equity and credit markets and Market acceptance risks and our Capital allocation plans other risk factors are detailed in our Securities and Exchange Commission filings, including our 10-K and formed in Q. I will now turn the call over to Robert Hass our Executive Vice President Robert. Thank you Lisa on January 28th, 2012 that we announced the sale of our shares of tempers group holding BV to an independent Foundation. I would like to provide some additional details on the foundation structure wage and why the sale tempers to the foundation was in the best interest rate and our shareholders the foundation stick teen continuity day off.
We look to the Future.
One hundred percent focused on our semiconductor business and the opportunities they present as the sole of business office is now behind us.
in line with that
our board has decided that it is the right time to promote Michael Lange took this lie, see if Operating Officer to Executive Officer of em Tech.
Michael Aspen over sing us semiconductor businesses and has in that same College of how was my conductor and silicon carbide markets. We sold he has walked side-by-side with
is an independent
Entity formed under Dutch law and created for the sole benefit of the employees customers and suppliers of Tempest. The foundation is governed by an independent board with restructuring expertise and no affiliation with em tacked. The foundation is a stand-alone entity with no shareholders Partners or members wage effective with the closing of the sale of Tempest mtech. No longer has any financial interest in the future losses or profits of Tempest or the foundation and has no further involvement or connection with and no control over the foundation other than the right to receive loan repayments upon currents of certain events often receive limited information from the foundation pursuant to the covenants set forth in the loan term the term loan agreement with Tempest.
Semiconductor divisions has ongoing discussions with our customers regarding their food needs and has been instrumental in developing our power semiconductor off and silicon carbide strategic growth plan our roadmap to Future successes.
S chairman I look forward to working with the Michael to capitalize on the Chrome opportunities in front of us.
our objectives in this in selling
Tempers were to stop the losses resulting from our solar operations, which were over ten million dollars in 2019 alone and to dedicate our internal resources to our power semiconductors strategy without the continuing distraction of the solar operations and its losses.
The January 28th, press release. We also announced.
The retirement of Robert Hass poop many of you have spoken with overtime.
As we stated in the press release we went through a robust sales process with an independent financial adviser that spanned nearly one year and the parties who merged as potential buyers offered terms that were unfavorable to us and most required a law large cash infusion from Amtrak. We evaluated these offers along with other options, which included keeping temperas and restructure. It ourselves in preparation for another sales attempt found it down or selling our temper shares to an independent Foundation where it can go through the restructuring and sales process independent of ametek wage keeping temperatures would have required the infusion of more casts resulting in continuation of Management's distraction and the burden of the ongoing losses all while maintaining wage.
Contributed much to mtec oval this twenty-seven years with the company and I said for the entire impact team as we wish him the very best in his retirement. I will now take the car to Michael Wang our chief executive officer Michael with the edge of our solar investiture. You can now focus our full and diligent attention on our semiconductor and silicon carbide businesses and the growth opportunities. They present them have real we have well recognized Brands great products distinguishable Technologies dedicated and talented employees and excellent service capabilities.
We have a diverse Global customer base of Market.
Certainty of whether it could be sold on more acceptable terms.
I tried to long-term growth profiles. We are on a very exciting path.
In the future winding down tempers would be extremely costly and time-consuming due to the obligations to suppliers and customers in Severance to Thursday is required under Dutch law does neither restructuring or winding down tempers would achieve our objectives in both scenarios. We would have continued losses during the restructuring and sale or wind down at the Tempest which on a cumulative basis could possibly be higher than what we have recorded for this quarter off while still retaining significant uncertainty and working with our Dutch legal advisers. We closely examine the foundation option. The foundation is a stand-alone entity Incorporated under Dutch law through the filing of a deed of Incorporation.
We are focused on new product development to drive a sustained organic growth. We look to continue to evaluate strategic Acquisitions to expand our product and Technology portfolio wage and build upon our strengths and areas that we believe will outgrow the overall assembly Market. We are diligently focused on continuous Improvement as we invest in capacity that our people our Technologies and our Management Systems.
Well, we are pleased that our first quarter performance, exceeded our expectations. We continue to look to the second half of 2020 or solid growth returned in the industry Thursday. We are confident that we have very strong platforms to deliver value and handsome results in an improving operating environment.
Given the unfavorable terms offered by perspective buyers during our own most year-long effort to sell temporus and after considerable review and deliberation management and our board concluded that selling Tempest to an independent foundation for a nominal amount was the best option for ametek to effectively and efficiently off exit the solar business and focus on its power semiconductor strategy the cash on temperatures balance sheet is primarily customer deposits off the loan provides tempers with the working capital necessary to remain a going concern, but they'll orders and give the foundation time to restructure tempers and physician it off an eventual sale.
BTU is a solid consistently profitable business with a worldwide customer base and diversify back and semi product portfolio supports many and Market touch us all to you geographies. We look to grow through deeper penetration of our markets product development as well as the highly selective Acquisitions to advance or expand our capabilities. We have never ending focus on product development in November 2019 being featured Aqua score our patent-pending technology and trade show in Munich month. And again just this week in San Diego at the Apex Rachel it was strong interest in this capability used to deal with Quest Management in a more efficient way in addition Aquas growth procedures, but team picture a vacuum Reflow oven a low voice other Reflow solution.
This week tempers met the first.
Milestone in the loan agreement and repaid $500,000 bringing the loan balance down to 1 million seven hundred thousand dollars and Tech pack our management team and our board of directors have no further involvement of any sort and Tempest the sale to the foundation allows for the continuation of the business office for the benefit of his employees vendors and customers and allows us to now Focus one hundred percent on the opportunities that are ahead and power semiconductor long. Does this down dasian sale accomplishes our objectives, and we believe is in the best interest of shareholders. I will now turn off all over to tell you swing or executive chairman. Thank you Robert. Thank you for joining our call today.
Bruce is a leader in emerging.
The millimeter clustered HTR computer furnaces four power chips and has more than 100 tools installed worldwide in q1. We sent the first three months HDR furnace to our second customer. I am also pleased to announce Bruce received another significant new order for as full 300 millimeter Club. Hcfa use our furnace solution from a top-tier global power sending customer in Asia this recent order affirming validates our Power Centre strategy and the increased interest in a highly successful and proven 300 millimeter horizontal decision for resolution moving on the pr often. We have added capacity with a much-anticipated moved facility in early spring.
This new facility dramatically positions as well for higher volumes of productivity and the capability for several years going forward. Hoffman is a premier brand instead of free polishing and consumable market and as a market leader, we are seeking an uptick in quoting activities, which is a good leading indicator of strengthening Marketplace plus the world is pushing the bristling towards silicon carbide for next-gen application.
We look to the Future.
One hundred percent focused on our semiconductor business and the opportunities they present as the solar business office is now behind us.
in line with that
our board has decided that it is the right time to promote Michael Lange. Took this Lee Chief Operating Officer to Chief Executive Officer of em Tech.
Yes, I see substrate and device Market size is expected to grow significantly over the next several years and we are well-positioned to participate as this growing demand for advanced power shifts justifies. We have a strong. Of Engineers ready to respond to our customers unique request for high-value solution. I am excited with the recent changes and investments in our people and Technology as intended towards our new power setting strategy. We are ready for the opportunities that are before us I very much look forward to updating you on our forward progress month lastly. I want to touch upon what's happening with the coronavirus in China first.
Michael Aspen over sing us semiconductor businesses and has in dead College of power semiconductor and silicon carbide markets with sold. He has worked side-by-side with
We are monitoring the health and well-being of our employees and partners second. We are navigating a very Dynamic situation making a quite difficult for us to forecast our fiscal Q2 a result of the press release you brought our Revenue range and cook that range down to accomplish slow return to normal operations in mid-February. If the situation caused a material change to our Outlet, you will provide an update to you and now I turn it over to Lisa to review our first-quarter financial results. Thank you. Michael net revenues increased slightly compared to the preceding quarter and decreased 11% from the first quarter of fiscal 2019 to meet conductor Revenue in fiscal Q 12025. It's the shipment of our 302 Fusion furnace to a new top tier power semiconductor customer which contributed to the sequential increase in Revenue to make sure
Of our semiconductor divisions has ongoing discussions with our customers regarding their food needs and has been instrumental in developing our power semiconductor off and silicon carbide strategic growth plan our roadmap to Future successes.
S chairman I look forward to working with the Michael to capitalize on the Chrome opportunities in front of us.
In the January 28th, press release. We also announced.
Revenue decrease compared to the prior-year quarter due primarily to lower the fusion furnace shipment silicon carbide LED Revenue decreased sequentially. Do you primarily to lower machine shipments was relatively flat compared to the prior-year quarter a December 31st, 2019. Our total backlog was thirteen point four million dollars a decreased from a backlog of fifteen point nine million dollars. It's September 30th 2019, which is adjusted to exclude r2d. The decrease is due primarily to shipments of our 300 millimeter HTR diffusion furniture and other shipments that were not immediately replaced with new orders backlog includes customer orders that are expected to ship within the next twelve months gross margin increased in the first quarter of fiscal 2020 compared to the prior-year quarter primarily due to a favorable product mix while decreasing on a sequential basis primarily due to a higher margin product mix in the fourth quarter of fiscal 2000.
The retirement of Robert Hass poop many of you have spoken with overtime.
Contributed much to em text over his 27 news. What's the company and I service for the entire impact team as we wish him the very best in his retirement. I will now turn the call to Michael when our chief executive officer Michael with the edge of our solar that that's the truth. You can now focus our full and diligent attention on our semiconductor and silicon carbide businesses and the growth opportunities. They present them have real we have well recognized Brands great products distinguishable Technologies dedicated and talented employees and excellent service capabilities. We have a dialogue
selling to
Administrative expense or sg&a and the first quarter of fiscal 2020 was 5.9 million dollars compared to six point 1 million dollars in the preceding quarter and six point six million dollars in the first quarter of fiscal 2019 sequentially sg&a decrease due primarily to lower employee-related expenses partially offset by higher legal fees related to our solar took pictures sg&a decrease compared to the prior-year quarter with the prior-year quarter including legal and other costs relating to the departure of our former CEO and in the current. Lower commissions and lower diffusion for Nestle's partially offset by increased legal expenses relating to our solar divestitures looking at income tax expense. We had a provision for the first quarter of fiscal 2004 both continuing and discontinued discontinued operations of $60,000 compared to $600,000 in the first quarter of fiscal 2019 the provision for yep.
first Global customer base of Market Leaders with attractive longer
term growth profiles we are on a very exciting path
we are focused on new product development to drive a sustained organic growth we look to continue to evaluate strategic Acquisitions to expand our product and Technology portfolio wage and build upon our strengths in areas that we believe will outgrow the overall assembly Market we are diligently focused on continuous Improvement as we invest in capacity and our people our Technologies and our Management Systems
Well, we are pleased that our first quarter performance, exceeded our expectations. We continue to look to the second half of 2024 solid growth return in the industry Thursday. We are confident that we have very strong platforms to deliver value Dancing results in improving operating environment.
Till 20/20 represents taxes.
Is primarily in our foreign jurisdiction, we were able to offset our US federal income taxes do with the tax benefit received from the sale of our to D. We recognized a pre-tax loss from the sale of our automation division r2d of 2.8 million dollars loss from continuing operations net of tax for the first quarter of fiscal 2020 was one point three million dollars fifteen cents per share. This is compared to income of 2 million dollars or two cents per share for the first quarter of fiscal 2019 and income of 1 million dollars or seven cents per share in the preceding quarter turning to cash unrestricted cash and cash equivalents that are continuing operations, December 31st, 2019 or fifty two point seven million dollars a month compared to fifty three million dollars at September 30th 2019 as of December 31st, 2019, approximately 16% of our unrestricted cash and cash equivalents at our control.
BTU is a solid consistently profitable business with a worldwide customer base and diversified back and sending product portfolio a supports many and markets just all cute geography. We look to grow through deeper penetration of our markets product development as well as the highly selective Acquisitions to advance or expand our capabilities month. We have a never-ending focus on product development in November 2019 featured Aqua score a patent-pending technology and Trace Road Munich off. And again just this week in San Diego at the Apex Rachel it was strong interest in this capability used to deal with with Management in a more efficient way in addition office growth the same button feature a vacuum Reflow oven a low voice auto Reflow solution.
Operations was held outside the United.
States mostly in China last quarter. I discussed our Capital allocation plans. Our teams are hard at work with our internal investment product development systems and capacity expansion. We are pursuing acquisition opportunities and on February 4th. Our board of directors renewed our share repurchase plans. We believe we have a sound Capital allocation plan, that would be profitable profitable growth for an attack and create value for our shareholders. Now turning to our Outlook is Michael indicated. We do want to caution investors at the coronavirus is expected to take an impact on our second quarter results are outlook reflects the January 27th Announcement by China's government to extend the Lunar New Year holiday and keep Enterprises closed until February 9th due to the fact of virus outbreak our Outlook. Also Builds an estimated time. We believe will be required for employees and a supply chain to resume normal work and production levels. The Outlook does not account for any phone number.
Bruce is a leader in emerging.
The millimeter clustered HTR the computer furnaces four power chips and has more than 100 tubes installed worldwide in q1. We sent the first three months HDR furnace to our second customer. I am also pleased to announce Bruce received another significant new order for as all three hundred plus page here that use our furnace solution from a top-tier global power sending customer in Asia this recent order of further validates. Our power send me strategy and the increased interest in a highly successful and proven 300 millimeter horizontal divisions for a solution moving on the pr often. We have added capacity with a much-anticipated moved facility in early spring.
This new facility dramatically positions as well for higher volumes productivity and the capability for several years going forward. Hoffman is a premier brand in.
measures taken by the Chinese government
Reading schedule which could cause our results to be materially lower than the outlet lastly the Outlook reflects some historical softness that occurs in our fiscal Q2 attributable to seasonality and the Chinese New Year for the quarter ending March 31st, 2020 our second fiscal quarter revenues are expected to be in the range of 10 million to $14 off its margin for the quarter ending March 31st, 2020 is expected to be in the upper 20s to 30% range with operating margin negative additionally in fiscal Q2. We expect to record a pre-tax loss on the divestiture of Tempest in the range of 12.5 million to $13 of which approximately 7.3 million dollars is the recognition of previously recorded accumulated foreign currency translation losses. The total pre-tax loss is not expected to have a material effect on our cash balances from our continuing operations. We also expect to rep
Send me some free polishing and consumable markets and as a market leader. We are seeing an uptick in quoting activities, which is a good leading indicator of strengthening Marketplace month plus the world is pushing the bristling for silicon carbide for next-gen application esic substrate and device Market size is expected to grow significantly over the next several years and we are well-positioned to participate as as growing demand for advanced power chips and testifies. You have a strong. Engineers ready to respond to our customers unique request birth Valley Solutions. I am excited with the recent changes and investments in our people and Technology as a pivot towards our new power setting strategy. We are ready for the opportunities that are divorced I very much look forward to updating you on our forward progress.
Lastly I want to touch up on what's happening in the coronavirus in China first. We are monitoring the health and well-being of our employees and partners.
a significant tax benefit
But relating to this loss which can be carried over to Future years the semiconductor equipment Industries can be cyclical and inherently impacted by changes in market demand additional operating results can be significantly impacted positively or negatively by the timing of orders system shipments and the financial results of semiconductor manufacturers a portion of an text results are denominated in rmbs a Chinese currency. The Outlook provided in this press release is based on an assumed exchange rate between the United States dollar and the R&B change the value of the R&B in relation to the United States dollar could cause actual results to differ from expectations. Now, let's turn the call over to the operator for questions operator. Thank you. We will now begin the question-and-answer session to ask that question. You may press * then 1 on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys to withdraw your question, ma'am.
You're navigating a very Dynamic situation making a quite difficult for us to forecast our fiscal Q2 results. As you saw in the press release you brought our Revenue range that range down to accomplish slow return to normal operations in mid-February. If the situation causes a material changes to our Outlook, you will provide an update to you and may I turn it over to Lisa to review our first quarter of an actual results. Thank you. Michael net revenues increased slightly compared to the preceding quarter and decreased 5% from the first quarter of fiscal 2019 to me conductor Revenue in fiscal Q 12020 includes the shipment of our 300 millimeter diffusion furnace to a new town to your power semiconductor customer which contributed to the sequential increase in Revenue semiconductor Revenue decrease compared to the prior-year quarter due primarily to lower diffusion furnishing.
Please press stars and to at this time. We'll pause momentarily to assemble our roster.
Silicon carbide LED Revenue decreased sequentially due primarily to lower machine shipments and was relatively flat compared to the prior-year quarter a December 13th. 2019. Our total backlog was thirteen point four million dollars a decrease from a backlog of fifteen point nine million dollars at September 30th 2019, which is adjusted to exclude r2d. The decrease is due primarily to shipments of our 300 millimeter HTR diffusion furnace and other shipments that were not immediately replaced with new orders backlogging my customer orders that are expected to ship within the next twelve months gross margin increased in the first quarter of fiscal 2020 compared to the prior-year quarter primarily due to a favorable effect next while decreasing on a sequential basis primarily due to a higher margin product mix in the fourth quarter of fiscal 2019.
And our first question will come from Craig Irwin with Roth Capital Partners, please go ahead good evening and thanks for taking my questions.
So as as we look down the runway and in 2020, I know there a number of sort of external factors that cloud visible a little bit but you did make the Strategic strategic decision in the last few months to move Hoffman to a new space. Can you maybe Joe's Crab in the visibility for increase sales out of Hoffman both on the equipment and the consumable side. What do you see is the prime drivers there and are there any other points of diversification that business that supported your decision to to increase your commitment?
selling General and
The street of expense or sg&a in the first quarter of fiscal 2020 was 5.9 million dollars compared to six point 1 million dollars in the preceding quarter and six point six million dollars the first quarter of fiscal 2019 sequentially sg&a decrease due primarily to lower employee-related expenses partially offset by higher legal fees related to our solar divestitures sg&a decrease compared to the prior-year quarter with the prior-year quarter including legal and other costs relating to the departure of our former CEO and in the current. Lower commissions took a fusion furnace sales partially offset by increased legal expenses relating to our solar divestitures looking at income tax expense. We had a provision for the first quarter of fiscal 2028 for both continuing and discontinued discontinued operations of $60,000 compared to $600,000 in the first quarter of fiscal 2019.
Craig this is Mike.
For a call when we look forward to the later part of this year and then also 20 21. We still see significant growth drivers off from Hoffman's customer base. If you if you follow all the leading away from manufacturers, they all have very large collection of all planned capacity expansions and quite a few of them are also running through or experiencing the same headwinds that we are facing today. So I'm so in some sense. We are tied to the cap that's expansion of these large players. However, we're still very bullish in the long-term demand for silicon carbide choices waivers. The the forward-looking applications are there there's a real demand for it unlike solar which was heavily subsidized.
The provision for fiscal 2020 represents taxes primarily in our foreign jurisdiction. We were able to offset our US federal income taxes do with the tax benefit received from the sale of our to deal. We recognized a pre-tax loss from the sale of our automation division r2d of 2.8 million dollars loss from continuing operations net of tax for the first quarter of 2020 was one point three million dollars or nine cents per share. This is compared to income of 2 million dollars or two cents per share for the first quarter of fiscal 2019 off an income of 1 million dollars or seven cents per share in the preceding quarter turning to cash unrestricted cash and cash equivalents that are continuing operations, December 31st, 2019 or fifty two point seven million dollars compared to $53 at September 30th, 2019 as of December 31st, 2019 approximately 16% off.
um
You know, I'm I'm very excited. It's been a long time that I I felt this excitement in our future prospects.
That's that's that's really good to hear. So then there's the expectation that there will be between three and five major Fabs wage for silicon carbide devices over the next single digit number of your small single-digit number. Hopefully, can you maybe describe for us what the potential, is for your diffusion process in a typical semiconductor plant how we we should look at that for conventional base power semiconductors versus silicon carbide. And do you see potentially a greater a greater opportunity still serving the pub the Silicon demand given that
Are unrestricted cash and cats.
Equivalent at our continuing operations was held outside the United States mostly in China last quarter. I discussed our Capital allocation plans. Our teams are hard at work with our emotional investment product development systems and capacity expansion. We are pursuing acquisition opportunities and on February 4th. Our board of directors renewed our share repurchase plan that we believe we have a sound Capital allocation plan that will drive profitable profitable growth for an Tech and create value for our shareholders. Now turning to our Outlook is Michael dated. We do want to caution investors that the coronavirus is expected to have an impact on our second quarter results are outlook reflects the January 27th Announcement by China's government to extend the Lunar New Year off and keep Enterprise is closed until February 9th due to the Corona virus outbreak our Outlook also Builds an estimated time. We believe will be required for employees and a supply chain to resume birth.
The world is still really short mosfets.
like to be teased
so in terms of silicon carbide device, we we certainly have no play with our Fusion furnace right now. I want to make that clear off however for for silicon-based power Icees and and also just general Partnerships. We do see a growing Trend month to move from 8 to 12 in the economics are there the current leader Infineon has has shown the Valley of the economics and a more and more of our tier one customers are either at the very least investigating it or asking for budgetary quotes to move into a power chip manufacturing for silicon carbide, you know, all of that is dependent on the s i c wafer Avengers.
I work in production levels.
Yeah, I looked is not account for any future measures taken by the Chinese government in response to the Health crisis that could further delay businesses from returning to a normal operating schedule which could cause our results to be lower than the outlet lastly the Outlook reflects some historical softness that occurs in our fiscal Q2 attributable to seasonality and the Chinese New Year for the quarter Thursday, March 31st, 2020 our second fiscal quarter revenues are expected to be in the range of 10 million to $14 gross. Margin for the quarter ending March 31st, 2020 is expected to be in the upper 20s to 30% range with operating margin negative additionally in fiscal Q2. We expect to record a pre-tax loss on a divestiture of Tempest in the range of 12.5 million to $13 of which approximately 7.3 million dollars is the recognition of previously recorded accumulated foreign currency translation losses dead.
and and there
Past expansion for for the substance. And so so we're we're preparing ourselves with the new facility. We're working on some new products and see where we stand right now is that
As long as we execute and we are executing. We're going to meet their next Camp X cycle that's expected towards we we believe the end of this year, Excellent. And then last question if I may your $53 billion in cash give or take is a pretty nice War chest now that you've completed your restructuring allows you to look towards investment for the Future Would you be more likely to invest in new products and new business initiatives organically or would you consider impact to be in an acquisitive mode where you could potentially um acquire competitors or adjacent products adjacent technologies that supplement existing portfolio. So Craig that's going to be a combination of both. We have to make investments organic growth. I will remind everyone and you that when we spoke
The total pre-tax loss.
It's not expected to have a material effect on our cash balances from our continuing operations. We also expect to recognize a significant tax benefit relating to this loss which can be carried over to a gym teacher years. The semiconductor equipment Industries can be cyclical and inherently impacted by changes in market demand additionally operating results can be significantly impacted positively or negatively by the timing of orders system shipments and the financial results of semiconductor manufacturers a portion of an text results are denominated in RMB a Chinese currency. The Outlook provided in this press release is based on an assumed exchange rate between the United States dollar and the R&B changes and the value of the R&B in relation to the United States dollar could cause actual results to differ from expectation. Now, let's turn the call over to the operator for questions operator. Thank you. We will now begin the question-and-answer session.
Just on solar for many years.
Neglected our operations and now we have to catch up and also be very competitive with our peers also from an acquisition standpoint. We are constantly and vigilantly looking at opportunities either direct Acquisitions that that fits well within our Valley Shades or or adjacent bolt and Acquisitions have been an Ampex DNA you've gone through several and we've been successful.
To ask that question. You may press * then 1 on your touchtone phone if you're
Excellent. That's good to hear. We'll keep up the solid execution and we look forward to continued progress.
Using a speakerphone, please. Pick up your handset before pressing the keys to withdraw your question, please press stars and to at this time. We'll pause momentarily to assemble our roster.
Our next question will come from Jeff Cohen something please go ahead.
And our first question will come from Craig or when with Roth Capital Partners, please go ahead good evening and thanks for taking my questions.
Yeah, good afternoon guys Craig asked most of the questions that I had in mind that you just level status on on China and Corona. You know what your head count is there just as long as a percentage of the total and then, you know Revenue exposed either directly or indirectly as you sort of formulated the guidance.
So as as we look down the runway and in 2020, I know there are a number of sort of external factors that cloud took a little bit but you did make the Strategic strategic decision in the last few months to move Hoffman to a new space. Can you maybe describe what you see is a visibility for increase sales out of Hoffman both on the equipment and the consumable side. What do you see as the prime drivers there? And are there any other points of diversification that business that supported your decision to to increase your commitment?
So so I'll I'll try to answer that you so we have approximately.
175 and two hundred employees in in our Shanghai Factory for 4 BTU Shanghai provides the majority of our Reflow oven Revenue. So so there is there is a great amount of uncertainty right now, but we never based is the only thing that I faintly remember now was the H1 N1 outbreak back in 2009 and I don't remember fortunately how we took over that. So we're navigating through uncharted waters thankfully all of our employees and our partners are in good health. And in addition there during itching to go back to work outside of what Lisa mentioned. We're just
Craig
Spike pastry recall when we look forward to the later part of this year. And then also 20 21. We still see significant growth drives from Hoffman's customer base. If you if you follow all the leading away from manufacturers, they all have very large considerable planned capacity expansions and quite a few of them are also running through or experiencing the same headwinds that we are facing today. So so in some sense, we are tied to the Catholics expansion of these large players. However, we're still very bullish in the long-term demand for silicon devices Wafers. The the forward-looking applications are there. There's a real demand for it unlike solar which was dead.
I asked for any changes expectation right now is you know, we will start resuming operations after all the February 10th on Monday off for Jeff. We you know, we looked at a number of different models and how this could impact and you know widened as Mike mentioned our our Revenue range for our Outlook and we'll just watch it closely and if we certainly hope February's more productive and and better than we anticipate there's a material update to provide we will we will do so
Makes sense completely understandable. Maybe just following up on Craig's other questions around p r Rahman and you mentioned Michael the visibility that your customers have in terms of multi-year expansions and 5 10:30 X in some cases of expansion of capacity. Can you just you know, give us some insight into the the conversation around wage mentioned quoting activity has picked up with the Hoffman is the intent of your customers and your relationship with them to have you know, this be a one-off every 3 to 6 months purchasing cycle or is there any sort of sitting down and you know coming up with a master plan over multiple years of of here's the number of polishing tools will need over a a multiple, you know, it's nice to process to avoid one off negotiations. I'm just trying to get a sense of how strategic you are as part of that process if it'll we've had a number of birth.
subsidized
You know, I'm I'm very excited. It's been a long time that I I felt this excitement in our future prospects.
That's that's that's really good to hear. So then there's the expectation that there will be between three and five major wage for silicon carbide devices over the next single digit number of years small single-digit number. Hopefully, can you maybe describe for us what the potential, is for your diffusion process in a typical semiconductor plant how we we should look at that for conventional silicon-based power semiconductors versus silicon carbide. And do you see potentially a greater a greater opportunity still serving the Silicon off the Silicon demand given that
customers
And machine they've they've been forcing for a toy on the exact nature and timing of their own expansion or then just just giving kind of likes one-liners like be prepared. This is what we need, right? We are often invested in our future capacity expansion. So so in terms of aligning with them, we you know, they they tell us where to go and we follow them that they have certain needs and and they're different across each each customers. And and then we we find a path to to age is a very competitive solution for that as time goes on. I do predict that we more closer discussions dead.
The world is still really short.
BTS
so in terms of silicon carbide device, we we certainly have no play with our Fusion furnace right now. I want to make that clear off however for for silicon-based power Icees and also just general Partnerships. We do see a growing Trend off to move from 8 to 12 in the economics are there the current leader Infineon has has shown the valley of that economics and a more and more of our tier one customers are either at the very least investigating it or asking for budgetary quotes to move into a power chip manufacturing or silicon carbide, you know, all of that is dependent on the s i c wafer manufacturers.
In terms of the exact timing and nature but outside of that. I'm not at Liberty right now to to say anything else.
and and there
capacity expansion for for the substrates and so so we're we're preparing ourselves with the new facility where we're working on some new products suck and where we stand right now is that
It's maybe just one follow-up on that. Hopefully you can answer but with the quotes today, you alluded to you know, better visibility in the second half of the Year broader semiconductor applications. Assume silicon carbide is in that is there a reasonable lack of sort of 2/4 from a quote today to win you would record revenue or what what historically in the the sick LED segment have that Delta been?
As long as we execute and we are executing. We're going to meet their next Camp X cycle that's expected towards we we believe the end of this year, Excellent. And then last question if I may your $53 billion in cash give or take is a pretty nice War chest now that you've completed your restructuring wage allows you to look towards investment for the Future Would you be more likely to invest in new products and new business initiatives organically or would you consider impact to be in an acquisitive mode where you could potentially acquire competitors or adjacent products adjacent technologies that supplement existing portfolio. So Craig that's going to be a combination of both. We have to make investments organic growth. I will remind everyone and you said when we phone number
I would I would I would say if we say it'll be approximately $200 worth of black.
Okay, perfect. That's all I had. Thank you. Thanks.
And our next question will come from Mark Miller with the Benchmark Company, please go ahead. Just wondering if you give us any insights about Optics and tax benefit in the March quarter.
I think that well, we'll still continue to have some legal fees within this quarter. So I would expect up X to remain fairly flat. The tax situation in Iraq will depend on where our income is generated in terms of foreign foreign jurisdictions, but we will be able to continue to offset our US income like we did this quarter.
Just on solar for many years.
We neglected our operation and now we have to catch up and also be very competitive with our peers also from an acquisition standpoint. We are constantly and vigilantly looking at opportunities either direct Acquisitions that that fits well within our badly chain or or adjacent and applications have been an Ampex DNA you've gone through several and we've been successful.
What was Cash Flow from operations in the December quarter?
Cash flow from operations in the December quarter. I'm pulling that right now.
It looks like it was just negative $168,000.
Is there any capex in 1/4 there is some capex in there a little bit of of of speaking any ads?
Thank you. Okay. Thank you.
Excellent. That's good to hear. We'll keep up the solid execution and we look forward to continuing progress.
This concludes our question-and-answer session. I would like to turn the conference back over to Lisa Gibbs for any closing remarks, please go ahead ma'am. Thank you for your time today and for your interest in this includes today's call.
Our next question will come from Jeff Osborne of Cowen and Company, please go ahead.
Yeah, good afternoon guys Craig asked most of the questions that I had in mind, but could you just level status on on China and Corona? You know what your head count is there is the same thing as a percentage of the total and then, you know Revenue exposed either directly or indirectly as you sort of formulated the guidance.
The conference has now concluded thank you for attending today's presentation. You may now disconnect.
So 12. I'll try to answer that you so we have approximately.
175 and two hundred employees in in our Shanghai Factory for or BTU Shanghai provides the majority of our Reflow oven Revenue. So so there is there is a great amount of uncertainty right now, but we never faced this being the only thing that I faintly remember now was the H1 N1 outbreak back in 2009, and I don't remember unfortunately how we woke up with that. So we're navigating through uncharted waters. Thankfully all of our employees that are partners are in good health and good position. They're they're interesting to go back to work outside of what Lisa mentioned. We're just
I asked for any changes expectation right now is you know, we will start resuming operations after all the February 10th on Monday off for Jeff. We you know, we looked at a number of different models and how this could impact and you know widened as Mike mentioned or our Revenue range for our Outlook and we'll just watch it closely and if we certainly hope February's more productive and and better than we anticipate there's a material update to provide we will we will do so
Makes sense completely understandable. Maybe just following up on Craig's other questions around p r Rahman and you mentioned Michael the visibility that your customers have in terms of multi-year expansions and 5 10:30 X in some cases of expansion of capacity. Can you just you know, give us some insight into the the conversations around home mentioned quoting activity has picked up for PR Hoffman is the intent of your customers and your relationship with them to have you know, this be a a one-off every three to six months purchasing cycle or is there any sort of sitting down and you know coming up with a master plan over multiple years of of here's the number of polishing tools won't need over a a multiple, you know, I'm process to avoid one off negotiations. I'm just trying to get a sense of how strategic you are as part of that process if it'll we've had a number of discussions wage.
leading customers
Yes, I speaking terms of syllables and machine they've they've been unfortunately for a toy on the exact nature and timing of other expansion other than just just giving kind of likes one-liners like be prepared. This is what we need, right? We are heavily invested in our future capacity expansion. So so in terms of aligning with them, we you know, they they tell us where to go off follow they that they have certain needs and and they're different across each each customers. And and then we we find a path too long to provide a very competitive solution for that as time goes on I do predict. There we more Club.
discussions in terms of
Exact timing and nature but outside of that. I'm not at Liberty right now to to say anything more than a $0.08. Maybe just one follow-up on that. Hopefully you can answer but with the quotes today, you alluded to you know, better visibility in the second half of the Year broader semiconductor applications. I assume silicon carbide is in that is there a reasonable lack of sort of 2/4 from a quote today to win you would record revenue or what what historically in the the stick Lem the figment has that Delta been?
I would I would I would say if we say if it'll be approximately $200 worth of black.
Okay, perfect. That's all I had. Thank you. Thanks.
And our next question will come from Mark Miller with the Benchmark Company, please go ahead.
Just wondering if you give us any insights about Optics and tax benefit in the March quarter. I think that well, we'll still continue to have some legal fees off within this quarter. So I would expect up X to remain fairly flat the tax situation. It will depend on where our income is generated in terms of foreign foreign jurisdictions off, but we will be able to continue to offset our US income like we did this quarter. What was Cash Flow from operations in the December quarter month cash flow from operations in the December quarter. I'm pulling that right now.
It looks like it was just negative $168,000.
Is there any capex in the quarter? There is some capex in there a little bit of of of speaking any ads.
Thank you. Okay. Thank you.
This concludes our question-and-answer session. I would like to turn the conference back over to Lisa Gibbs for any closing remarks, please go ahead ma'am. Thank you for your time today and for your interest in this book reads. Today's call.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.