Q4 2022 Amtech Systems Inc Earnings Call
Good day.
And welcome to the Amtech systems fiscal quarter and fiscal year 2022 earnings Conference call. Please note that this event is being recorded.
I would now like to turn the call over to Erica Mannion of Sapphire Investor Relations.
Good afternoon, and thank you for joining us for Amtech systems fiscal fourth quarter and full year 2022 conference call with me on the call today are Michael Whang, Chief Executive Officer, Lisa Gibbs, Chief Financial Officer, and Paul Lancaster, Vice President of sales and customer service.
After close of market today Amtech released its financial results for the fiscal fourth quarter and full year of 2022.
The earnings release is posted on the company's website at Www Dot Amtech Systems' dot com in the investors section.
Before we begin I'd like to remind everyone that the safe Harbor disclaimer in our public filings covers this call and our webcast.
Some of the comments made during today's call will contain forward looking statements and assumptions that are subject to risks and uncertainties, including but not limited to those contained in our SEC filings all of which are posted within the investor section of our corporate website.
The company assumes no obligation to update any such forward looking statements you are cautioned not to place undue reliance on forward looking statements, which speak only as of today.
These statements are not a guarantee of future performance and actual results may 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 technologies used by customers and competitors change in volatility and the demand for 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 rais ongoing logistics supply chain and labor challenges capital allocation plans and the worldwide COVID-19 pandemic.
Other risk factors are detailed in the company's SEC filings, including its Form 10-K and forms 10-Q.
I will now turn the call over to Michael Whang, Chief Executive Officer.
Thank you Erica and everyone for joining us today fiscal.
Fiscal year 'twenty, two was a strong year for amtech with over $114 million in bookings of $106 million in revenue and $51 million in backlog exiting the year took.
To place does some perspective, despite challenges during the year, including the Shanghai locked down in fiscal Q3 revenue for the year grew 25% with backlog continuing to grow.
Driving our backlog growth as our strengthening and diversification of EV related demand across multiple product lines, primarily for our U S operations.
Q4 revenue was $32 million up 32, 33% year over year as we are able to service much of the advanced packaging and SMT demand built up during the Shanghai locked down in Q3.
Overall, we remain excited about the long term opportunities across all of our businesses well.
And then the semi business unit following nearly nine straight quarters of strong demand for our advanced packaging products, we have begun to see softening in new orders as customers digest existing capacity and evaluate capital spending projects.
Light of the changing market conditions.
In addition in high volume SMT applications, we are seeing a shift in global strategy.
Our customers look to mitigate multifaceted risks, while this is causing delays and disruptions to overflow for now we feel this redistribution of the customer base will present, a great opportunity in the near future.
Also within the semi business unit we.
We have seen meaningful increases in demand for our high temperature built versus driven by multiple high volume applications, serving the EV market.
These applications include thermal processing of easy sensors.
Battery cooling assemblies and power module substrates among others.
And the materials and substrate business unit.
We continue to see strong demand for our consumable products driven by the ramp in silicon carbide wafer capacity add.
As we have said in the past this will be a multiyear capacity expansion cycle as individual customers ramp wafer capacity, then digest then ramp again.
As evidence of this in the December quarter, we are seeing a stabilization of consumable demand.
The existing wafer capacity is fully utilized and would expect to see a subsequent step up in demand as our next phase of wafer capacity expansions are brought online.
In summary, while we are dealing with material disruption and customer demand we.
We are confident that our strategy to align our divisions to high growth megatrend markets such as E D.
Taken hold.
In fiscal year 2022.
We saw a four fold increase in bookings.
Related to EV applications.
With participation expanded to multiple product lines across all of our business units.
We believe this strategic alignment to megatrend growth at multiple intersection points.
Creates a strong a more durable foundation for value creation in the coming years. As we look ahead. We are confident we are well positioned in the growth markets with exposure to several secular tailwind.
It's a significant opportunity to drive increased profitability and shareholder value as demand accelerates and we realize the operating leverage built into our current business model I will now turn over the call to Paul Lancaster.
Thank you Michael expanding further on the demand environment with our advanced packaging and SMT products. We continue to see healthy mid to long term interest. However, we have seen near term softening given both the cyclical nature of the industry and macro semiconductor headwinds offsetting this as Michael mentioned.
We are seeing strong growth in products with exposure to the electric vehicle applications. For example last quarter. We received an initial 8 million dollar order for a high tech belt furnaces growing backlog for these products to approximately 50% of the company total.
Within the Silicon carbide market market, which at this stage is primarily focused on EV. We continue to see increases in consumable demand as our customers execute on their capacity expansion plans.
As evidence of this in the fourth fiscal quarter, we saw a 120% year over year revenue growth for these products.
It is important to remember, though that going forward. This will be a multiyear expansion effort and the pace of capacity additions is often longer than that of traditional silicon.
Taken together the demand for these products, namely high temp belt furnaces, and silicon carbide consumables remains very robust.
At this stage limiting our ability to readily service. This demand is a combination of supply chain constraints and internal capacity.
These products are predominantly manufactured in the U S. We are executing to further expand our manufacturing capacity as strengthened our supply chain to reduce lead times and risks.
While we are still early in the process. We are urgently moving forward to ensure we have the appropriate scale capability and resiliency to more quickly convert backlog to revenue and capture the opportunity ahead.
I'll now turn the call over to Lisa.
Thank you Paul.
The news increased 62% sequentially and 33% from the fourth quarter of fiscal 2021 with the sequential increase primarily attributable to increased shipments of our advanced packaging equipment and increases in Palestinian equipment and consumables as a reminder, during the third quarter of fiscal 2022, our Shanghai facility.
It's closed for approximately two months due to the government mandated closure relating trips coverage policies.
Increase in net revenues from the fourth quarter of fiscal 'twenty 'twenty. One it was primarily a result of increased shipments across all of our product line.
Margin increased sequentially and from the fourth quarter of fiscal 2021 due primarily to increased utilization at all of our locations, partially offset by increased material costs, primarily in our semiconductor segment.
General and administrative expenses increased <unk> $1 million on a sequential basis point $7 million compared to the prior year period.
The increase in the fourth quarter of fiscal 2020, one primarily relates to the timing of external and internal audit fees.
Research development and engineering decreased $3 million sequentially and was relatively flat compared to the same prior year period.
Operating income was $3 $9 million compared to operating income of $9 $6 million in the third quarter of fiscal 2022 and operating income of $1.3 million in the same prior year period.
Income tax provision was $6 million for the three months ended September 30th 2022, compared to a provision of $20000 in the prior quarter and $7 million in the same prior year period.
Net income for the fourth quarter of fiscal 2022 was $4 $2 million or <unk> 30 per share. This compares to net income of $10 $2 million or <unk> 73 per share for the preceding quarter.
And net income of $7 million or five cents per share for the fourth quarter of fiscal 2021.
Unrestricted cash and cash equivalents at September 30th 'twenty, 'twenty, two or $46 $9 million compared to $47 $7 million at June 30th 2022.
Approximately 84% of our cash balance is held in the United States.
As we conclude our 2022 fiscal year, we are pleased with our annual results of $106 million in revenue an increase of 25% from fiscal 2021 and net income of $17 $4 million or $1.22 per diluted share.
The $12 5 million dollar gain from the sale of our building in Massachusetts was an added benefit to our fiscal year 2022 result.
And resulted in a net cash inflow of approximately $14 $9 million.
Looking ahead into our fiscal 'twenty three we will continue to focus on our growth strategy, which includes product development to drive organic growth and pursuing strategic M&A opportunities.
We are also evaluating capacity and labor investments to strengthen our capabilities and to ensure our readiness for the growth. We see ahead in EV related products and services across all of our business units.
And to help us accelerate the servicing of our back on.
Another key consideration for our capacity investments as mitigating business continuity risk.
Now turning to our outlet as Paul discussed supply chain constraints and disruptions in our U S business are impacting our near term results as is the softness in SMT that that's packaging.
For the quarter ending December 31, 2022 our fiscal first quarter revenues are expected to be in the range of 21 million to $23 million with operating margin negative.
The company's outlook reflects the ongoing logistical impacts and the related delays for goods shipped to and from China as well as the supply chain delays, we are experiencing in our U S operations.
Actual results may differ materially in the weeks and months ahead. Additionally, the semiconductor equipment industries can be cyclical and inherently impacted by changes in market demand.
Our 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 Ametek's results is denominated in RMB is a Chinese currency.
Outlets provided is based on an assumed exchange rate between the United States dollar and the RMB.
Changes in the value of the RMB in relation to the United States dollar could cause actual results to differ from expectations.
Now I will turn the call over to the operator for questions operator.
Thank you at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star.
Yes.
And one moment, please while we poll for questions.
And our first question comes from the line of Craig Irwin with Roth Capital. Please proceed with your question.
Good evening and thanks for taking my questions.
So the first question I wanted to ask is about the $8 million order in the quarter. I believe you said it was for a a belt furnished as this for an individual unit or multiple units.
Can you can you maybe share whether or not this is a service single site and can you clarify for us. If this is for a silicon or silicon carbide, our SAP application.
Hi, Craig good to hear from you and thanks for joining us I'm Gonna have Paul answer that question and give you. Some additional details on that specific order.
Hi, Craig.
This was for multiple units. These are a controlled atmosphere furnaces built out about directors facility in Massachusetts.
<unk>.
And they are going to a single site factory located in Asia.
For a week, it's a direct bonded copper application used for making components directly related to electric vehicle electrification applications.
Okay excellent excellent. So this is it sounds like it's sort of.
Downstream in the packaging market is that fair sort of for the module Assembly.
Okay, exactly understand sort of where okay. Okay.
Right.
My next my next question is truly.
This is a supply chain issue in the United States right.
You guys are a little bit off cycle. So this is this is very informative for all the investors that follow.
This industry and are obviously, you know listening carefully to what you say because we know that you've managed the company very well.
Can you maybe give us a little bit more color on which components are seeing scarcity right now and whether or not this has changed dramatically in the last couple of months or if this is sort of a continuity deterioration improvement.
Any color here that you thought you could share would be useful.
Hi, Craig.
I can take that one so so this is more of a continuation of the challenges that we see at the onset of Covid.
As you know there are shortages across the board.
Amongst our peers and customers in electronics, especially of chips as silly as it sounds.
Motor drive units and an even sheet metal.
The volatility that we've seen in our supply chain pre COVID-19 is real and as we try to shift away from that volatility source. We're also finding out that that.
But the new areas that we're looking into to shore up and strengthened our supply chain is not at a position that's comparable to say Asia right I would say that it is overall it is stabilizing is getting better as we navigate through different supplier.
<unk>.
And then also based on the current macro disruptions logistically Geo politically.
It is imperative that we diversify away from our traditional supply chain base and the strength of that area. That's that's very key to servicing very quickly be growing backlog that we have that my eyes, it's not sustainable and we are taking.
Rapid steps at the moment.
To diversify and strengthen our supply chain.
Understood that makes a lot of sense.
Hum.
Coming to the the silicon carbide consumables.
You know that's exciting growth to see that growing more than 100%.
Can you can you maybe share with us a little bit more color.
The market leaders are all looking for multi fold growth off of where they were last year and you know things have been lagging for many of the producers.
Can you share whether or not this this is more than 100% growth you saw was.
Dollar volume for for Amtech.
And whether or not it correlates to the the numbers of square inch of of wafers processed or if given the anticipated move to eight inch wafers and some of the other.
<unk> in the market or are causing sort of the opportunity per square inch to be slightly different for eight inch versus six inch or six inch today versus what six inch was you know a year ago two years ago.
Hi, Craig This is Paul I'll kind of give you a little color there.
To answer your first question, yes that was revenue growth year over year.
And it is it is we don't we can't go into great detail on sort of the configuration of our consumables.
This confidential obviously.
But it is tracking pretty well as we said previously there's always been a lot of talk about expansions on the SaaS side as it relates to silicon carbide, but what we're seeing today is wafer capacity is starting to finally expand.
And we're seeing this growth because of those public announcements, where they are adding capacity on the wafer side and that's the areas where our crystal balls are used.
We've said in the past that as states expand we will see an increase in sort of a plateau and Ed and then as they expand again, we will see another step level increase as well.
So we anticipate this to continue.
It's hard to speculate at what rate because you know a lot of these leaders are very let's.
Let's say closed in terms of providing forecasts implants, but.
Overall, the demand environment is very favorable.
You know obviously it sounds like the supply the demand will outstrip supply for the remainder of this decade, so we're well positioned and as Lisa mentioned, we are continuing to invest in capacity.
As Michael mentioned the supply chain has been.
Florida side to be sure that we're ready to service that and ramp when it does continue to happen.
And Craig I would add.
One less.
Sure I'm, sorry, Hi, this is Mike I will add predominantly the consumables are still on six inch.
That is exactly what I'm going to ask so eight inch is not yet material and that's that's not what these are.
Is that a fair okay. Yes, that's fair we are sampling eight inch but it's it's not anywhere near.
Volume.
Levels. So so its in my eyes is still.
Still like.
Pilot line evaluation.
Understood understood well, hey, guys. Congratulations on a well executed quarter, we do understand supply chains are challenging for everyone in our you.
You know look forward to that being resolved for you in the upwards trajectory continuing the path you wrote.
Last year. Thank you.
That's correct Craig Thank you Craig.
And just as a reminder, if you have any questions you May press star one on your telephone keypad. Our next question comes from the line of Mark Miller with the Benchmark Company. Please proceed with your question, let me add my congratulations on the strong quarter.
Getting back to the $8 million order, you just announced a where the shipments are and they're gonna be throughout fiscal 'twenty 'twenty three.
For the first half of the year.
I think it's it's we indicated in the press release its more the back half of our fiscal 'twenty three mark.
Okay.
You're talking about a change in customer base is that just more a.
Can I interpret that meaning you just seen no growth in terms of the consumables versus other areas like E. P.
Yeah.
Hi, Mark This is Paul Lancaster, Yeah, we indicated there is a softness right now in our advanced packaging and again, we did see some significant growth year over year on the consumables, but additionally, we saw some significant growth in the.
Belt furnaces, the configured bell furnaces that are built out of our U S factory and our <unk> Division.
A lot of that's being driven with end markets related to electric vehicle applications.
Hey, Mark This is Mike I will also add that there is a portion of our ability of our business right now.
That the ebbs and flows with a broader funnel conductor market right, but what what gives me great comfort and excitement.
Is that a greater portion of our business as evidenced by that recent order and an approximately half of our backlog is related to EV applications, we have more overflow of more demand and and megatrend growth areas that gets smoothed out.
And counter the natural cyclicality in the semiconductor market.
Can you break out in terms of adult furnaces, what impact they were what percentage of sales they were last quarter.
Unfortunately, we do not provide that that breakout I know I know it would be nice to have that but we've not provided that publicly.
Can you just one more on any impact on the U S restrictions I don't I don't believe there should be an impact but it just won't have the U S that when the new U S restriction have they had any impact on your customers, that's more advanced logic and memory I know that.
Yes, absolutely right work so far there has been no to minimal impact for us the mark the market segments. We serve are not restricted from.
From the current.
U S government restrictions.
Thank you.
Okay, all right. Thanks, Mark Thanks, Mark.
Our next question comes from the line of Kevin Garrigan with West Park Capital. Please proceed with your question.
Hi, everyone. Great speaking with you again, let me Echo my congrats on the strong execution just a few questions on my end to start you know this is a multi part question. You know you booked a large repeat order you increase bookings relates to E V by Forex.
Electric vehicles are becoming increasingly significant can you can you kind of give us a sense of the dollar opportunity for amtech when it comes to electric vehicles over the next few years and you know how does this number changed since last year of 2020 and would you say that we're still full steam ahead and you think you might see some things slow next year.
Well so we started looking at me with a stern.
But what I can say is there there is sufficient momentum in EV growth that occurred in the last fiscal year, which in the beginning it was a nice surprise, but then it became more than a trend right and what we.
Anticipate it going forward is that we will continue to capture more E V related orders outside of our traditional materials and substrate business units and this is very exciting very heartening for us that the across all of them.
Our business units now they are fully participating in the EV demand growth cycle.
Okay got it that makes lot of sense. Thank you for that and then Lisa you know you've had a solid cash position can you kind of give us a sense of what your focus is in terms of capital allocation.
Sure you know as we've talked about the challenges that we're facing now in our capacity and supply chain. I mean, we're looking very closely at what we need to do to to build that up.
So when I talk about capacity that can range from you'll finding some contract manufacturing partners to help us work that backlog as.
Well as you know some possible shifted the science into our our current our workforce. So that we can start to bring that backlog down and a more meaningful faster way. So that's part of it.
Yeah, we we've talked about product development, and where we're going to have some exciting products on the horizon in the next year and then M&A you know it continues to be something that we're very focused and interesting and interested and we'll see if it's you know this current environment might present.
You know that our opportunities than we saw during some of the peak.
On peak cycle. So all of that is very much on our radar and and then as we've done in the past as we work through those priorities, yeah, well look at.
Buybacks and other ways to return capital to our shareholders.
Yeah.
Okay Perfect and then just the last one we just we just spoke about electric vehicles. You know as you look out to 2023, just at a high level you know what what are kind of the one or two opportunities that are that get you guys. Most excited about next year and then you know one of the what are the one or two things that you know you're most worried.
The battery that keeps you up at night.
Oh I'll take the first swing at that so so what keeps me up at night is the continued uncertainty and volatility that we're all facing especially especially around.
Trade sanctions logistical flows and supply chain and I've made this comment earlier or is that.
So what we.
But what we've all experienced since 2020 is that we've built a very nice fair weather global supply chain that couldn't stand up to the rigors of the current volatilities in the storms that we're facing and we're just now I think starting to adapt but that.
Patient takes time, because we invested just globally. So much of our investments in the supply chain was in one geographic area and now we need to kind of mitigate the risks.
Around that system right.
So that's that's what keeps me up at night more than anything else. It's just the ongoing supply chain logistical issues. What I'm excited about is our our two parts. If that's under one narrative right. Now. It is is that we have firmly latched on to the growth opportunities.
In electric vehicles, the vehicles themselves and the broader infrastructure and unlike prior years, where we only had one business unit participate or materials and substrate now that has swung across to our other business units.
And that's that's very exciting so so we have a play on the materials side with silicon carbide.
Sure for the EV growth and then we also have a play more downstream in the assemblies and modules from from our belt purchases made in the U S.
And I do anticipate that to try to grow in the coming years.
Okay perfect that's awesome.
Yeah that was all I had I appreciate the color and congrats again.
Thank you Joe and thank you. Thank you.
And it looks like we have one more question from Mark Miller with the benchmark Company. Please proceed with your question.
I was just wondering about the guidance you are you had similar revenues in the June quarter of 2020. One yet you had it looks like operating profit I'm. Just wondering what's different is it margins or opex, what's causing you to two forecasts operating a negative operating margin.
A lot of it is product mix. So right now you have the softness that we're seeing in our advanced packaging and SMT and much as are our products that ship out of our Shanghai facility, that's where we're having the most softness in our our bookings. So you know where we're relying more heavily on R. R.
U S adult products, which had a lower gross margin profile, so product mix and we are seeing some material cost increases as well, which you know we're doing our best to counteract with with some level of price increases we're trying to hold opex as steady as we can but labor certainly is driving some increase.
This as well.
Thank you.
Smart.
And we have reached the end of our question and answer session and it's often concludes today's conference and you may disconnect. Your lines at this time.
You for your participation.
Okay.
Yeah.
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