Q1 2021 Amtech Systems Inc Earnings Call

Please standby.

Good day and welcome to the Amtech systems first quarter 2021 earnings Conference call. Please note that this event is being recorded and I'd like to turn the call over to Eric Mannion of Sapphire Investor Relations.

Good afternoon, and thank you for joining us for Amtech systems fiscal first quarter 2001 conference call with me today on the call from Michael Whang, Chief Executive Officer, and Lisa Gibbs Chief Financial Officer.

After close of market today Amtech released its financial results for the fiscal first quarter 2021.

The earnings release is posted on the Companys website at Www Dot Amtech systems Dot com and the investors section.

During today's call management will make forward looking statements all such forward looking statements are based on information available as of this date and the company assumes no obligation to update 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 and the forward looking statements or changes and the technologies used by customers and competitors.

And volatility and the demand for products and 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 capital allocation plan and the worldwide COVID-19 pandemic.

Other risk factors are detailed on the company's SEC filings Inc.

Clothing, its form 10-K and form 10-Q.

Now I will turn the call over to Michael Whang, Chief Executive Officer.

Thank you Erica.

<unk> delivered strong results and the first quarter with revenue of $18 million coming in at the high end of our expectations.

Robyn and return to overall profitability and cash flow generation.

Activity within the semi markets continue at a strong pace.

Notably with our customers and the Asia Pacific region.

Turning to make capacity investments.

And this market advanced packaging applications remain the primary driver of demand.

Current market forecasts indicate a strong outlook for the broader industry in 2021.

We're seeing this translate to order activity and our <unk>.

Alex at this point demand is approaching capacity at our Shanghai facility.

We're exploring options to add incremental value for option capacity as needed.

While this market is performing very well for amtech.

It is worth noting that this only comprises a portion of balance within our overall from each segment.

For the other two core product lines with under the <unk>.

Principally our custom high 10 furnaces, which are new.

And for a variety of thermal costs and applications and the Horizontals and please refer to as our power chip applications dialog with customers to increase along the quoting activity.

These markets, we are seeing an increase in activity and built the Asia Pacific and North American regions as global economies adjust to operating within the ongoing pandemic and move forward with capital investment plans.

Within the power semi market our customers are moving forward with their capacity expansion plans, including the continuous.

Continuous from question from 200 millimeter to 300 millimeter process lives.

The first quarter with shifting follow on order and fourth cluster 300 millimeter.

Horizontal diffusion furnace system.

And are now and the process of bringing that system online.

We are starting to see supply chain shortages for automotive semiconductors.

Blake on increase in quoting activity.

Many of these projects on multiyear initiatives.

We're already in the planning phase late last year. The timeline of some of these have begun to accelerate however, these products often carry a multi quarter lead time, and thus we would not expect to see meaningful revenue contribution until the second half of calendar 'twenty and 'twenty one.

We are very pleased with the performance of our Sunday select and so far this year following a year of strong growth and the vast semi packaging applications and 2020, we are seeing demand continue into 2021.

And the layering and incremental high temp furnace and power semi orders, helping to drive the upside move.

Moving on to our Silicon carbide new segments.

Continue to maintain healthy dialogue.

And our customers as they execute on their capacity and fashion plans in the coming years.

And as we've discussed on prior calls to date device manufacturers and been able to grow device output and.

And service near term demand by breaking bottlenecks and improving yields throughout their manufacturing process.

And the need for investments and wafer and capacity, where amtech participates Walt.

While this has caused our near term results remained flat versus growing in line with the overall device output.

This dynamic is only temporary.

Planned fab expansion initiatives currently underway to address a burgeoning electric vehicle and industrial and communications demand forecast and years ahead.

Wafer manufacturers will be required to make significant investments and their wafer capacity to meet growing demands.

<unk> I think there is the demand for amtech as our lead times for our products are often short on those.

Device manufacturing equipment.

And would expect to see an uptick in demand once the new production volume and wafer capacity is brought online to service the needs of new devices and manufacturing facilities.

Given our market, leading position and consumables roadmap for new platforms and reach.

And we've completed capacity expansion and is less mature and slicing and manufacturing operations.

And are well positioned to capture this opportunity you want on purchase.

We continue to remain as excited as ever about the long term opportunities in front of US, we believe our leadership and market segments with exposure to several secular tailwind and creates a significant opportunity to drive increased profitability and shareholder value as day.

And our salaries and when you realize the operating leverage built into our current business model.

And now I turn the call over to Lisa to review, our first quarter from actual results.

Thank you Michael net revenues increased 19% sequentially, primarily attributed to the shipment of our 300 millimeter cluster and HCR diffusion furnace to a top tier global power semiconductor customer as announced previously.

While our book to Bill was roughly equal on the first quarter. It is important to note that revenue and the first quarter included the Florida <unk>.

And furnished shipment and adjust.

Adjusting for that our book to Bill ratio would have been closer to one two to one demonstrating the strength, we are seeing and the power semi market.

Gross margin increase and the first quarter and fiscal 2021 to 42 per cent compared to 33% and the fourth quarter and fiscal 2020.

This was primarily due to favorable favorable product mix, most notably strong shipments of our larger advanced packaging products.

Selling general and administrative expenses decreased $1 million sequentially and $7 million compared to the same prior year period.

Decrease compared to the same prior year period was primarily due to legal costs incurred in fiscal Q1 2020 relating to our solar divestiture.

Operating income and the first fiscal quarter of 2021, and it was $1 $1 million compared to operating loss of $1 $2 million and the fourth quarter and fiscal 2020, and operating income of $1 $6 million and the same prior year period.

Income tax provision was $1 million for the three months ended December 31, 2020 and includes a benefit of approximately $3 million related to the reversal of previously recorded uncertain tax positions and.

Income from continuing operations net of tax for the first quarter of fiscal 2021 was <unk> $7 million or income of five cents per share.

This compares to a loss from continuing operations of $1 3 million or nine cents per share for the first quarter of fiscal 2020 and loss of $2 million or 14 cents per share and the preceding quarter.

Unrestricted cash and cash equivalents as of December 31, 'twenty, and 'twenty, where $45 $6 million compared to $45 $1 million at September 32020.

Approximately 88% of our cash balance is held in the United States.

After a challenging 2020, we were pleased to see a return to profitability. This quarter and are encouraged by our strong booking trends and customer quoting activities. We continue our focus on executing our longer term strategy and achieving our capital allocation goals, including capacity expansion product development management and information systems and <unk>.

M&A.

As it relates to capacity expansion and are building lease for our Shanghai facility expired and was not renewed and we are excited to relocate to a larger building later this summer.

Building and will increase capacity and support of our peer Max product line, serving our advanced packaging and other semiconductor packaging and SMT customers now.

Now turning to our outlook for the quarter ending March 31, 'twenty 'twenty, one and our fiscal second quarter revenues are expected to be and the range of $18 million to $20 million gross margin for the fiscal second quarter is expected to be approximately 40% operating margin positive.

The semiconductor equipment industry is cyclical and inherently impacted by changes in market demand and.

And the global pandemic.

Pandemic may also have impacts on our customers and supply chain.

The shortage of shipping containers and a related delays for goods shipped from China and they also impact our operating results and.

Additionally, operating results can be significantly impacted positively or negatively by the timing of orders systems shipments and the financial results and semiconductor manufacturers.

A portion of Amtech results are denominated in RMB Eve and Chinese currency.

The outlook provided in this press release is based on and assumed exchange rate between the United States dollar and the RMB changes and the value of the RMB in relation to the United States dollar could cause actual results to differ from expectations.

Now, let's turn the call over to the operating for operator for questions operator.

Thank you if you'd like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off July Arsenal true chart equipment.

And then press star one to ask a question.

And we'll take our first question a day from Jeff Osborne with Cowen and company.

Hey, good afternoon, guys and great to hear about the quoting activity picking up and congratulations on the results.

A couple of questions on my and I was wondering if you can just touch on the urgency of the conversations around capacity and the impact of the semi shortage as it relates to auto and other industries out there.

Hi, Jeff Thanks for joining us thanks for your question.

There is there is a certain degree of urgency and frequency debt that we have and are experiencing starting from last quarter.

And then on two new you're a current period so.

Hi.

And I'm Heartened also encouraged.

M with what's on the pipeline.

And and I can't wait to see.

What what comes about and the future.

Got it and then.

Can you just so you have the big order that.

Helped in terms of mix can you just talk about the gross margin outcome for the quarter relative to your guidance I think it was originally mid thirties.

Assumed you knew that order was coming in and so what else was the factor there to get to close to 42% versus the mid thirties guidance.

Thanks, Josh It really was.

Part of it wasn't necessarily that order, we certainly knew that order, but it's going out this quarter. It was it was a product mix that occurred a little bit later and a quarter of our much larger advanced packaging and products that have a very nice margin profile for us.

Got it and then I'm trying to understand you had a good eight to 10 quarters in a row sort of mid <unk>.

<unk> gross margin to low forty's for the OLED and Silicon carbide segment and the last quarter and September 15, and then 25 is that because of the expansion that you did and Pennsylvania, PR Hoffman that theres some.

Production or yield issues or what's going on there or is this the new normal combination of the.

The increased capacity that we have got some additional rent expense and on.

And some new equipment and depreciation that's impacting that and and certainly you know as that.

Growth occurs and we certainly expect the gross margin to return to normalized levels.

But that might take a few quarters is that a safe assumption that is a safe assumption.

Got it and.

And then.

And how should we be thinking about with the relocation.

And Shanghai with Youll be to your facility is how.

How do we think about Opex are you hiring a lot of people to gear up for this growth are there any new products that require any incremental expenses that we should be thinking about.

Oh, you know really from an Opex perspective, we'll keep that.

Very contained and we're doing this with a lot of our internal talent and we have some great people over there that that can help manage and and we're using some external help as well I don't expect a significant impact on the Opex side, there will be some capex that will happen and you know kind of that mid to late summer timeframe and as.

As we do a fairly significant build out when you lease the building and China, usually sit empty. So there'll be some significant capex I think in total for the year I would expect it to be on par with what we had last year.

Two and a half million range.

Got it.

And that's all I had thanks so much.

Thank you.

And.

At this time, we will conclude today's call. Thank you for your participation you may now disconnect.

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