Amtech Systems Inc. Q2 2023 Earnings Call
Speaker 1: I that.
Speaker 1: tum- 1840 tight defense
Speaker 2: recorded.
Speaker 2: I would now like to turn the call over to Erika Manning of Sapphire and Vista Relations. Please go ahead.
Speaker 3: Good afternoon and thank you for joining us for Amtech Systems fiscal second quarter 2023 conference call. With me today on the call are Michael Wang, Chief Executive Officer, Lisa Gibbs, Chief Financial Officer, and Paul Lancaster.
Speaker 3: Excuse me, Vice President of Sales and Customer Service. After close of market today, Amtech released its financial results for the fiscal second quarter of 2023. The earnings release is posted on the company's website at www.amtechsystems.com in the investors section.
Speaker 3: 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 to be 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.
Speaker 3: today. 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 and the technologies used by customers and competitors.
Speaker 3: 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 risks, ongoing logistics, supply chain and labor challenges, capital allocation plans, policy upon peak growth
Speaker 3: 2023.
Speaker 3: Other risk factors are detailed in our SEC filings, including our Form 10K and Form 10Q.
Speaker 3: Additionally, in today's conference call, we'll be referring to non- GAAP financial measures as we discuss the second quarter financial results. You'll find a reconciliation of these non- GAAP measures to our actual GAP results, including the press release issued earlier today.
Speaker 3: Now, I would like to turn the call over to Michael Wang, Chief Executive Officer.
Speaker 4: Thank you, Erica and everyone for joining us today. The second quarter we achieved $33.3 million in revenue representing a year-over-year increase of 21% inclusive of our recent acquisition of Entrepix. On an organic basis, we have achieved $33.3 million in revenue.
Speaker 4: Revenue was roughly flat at strong demand for our high temperature built furnaces for EV application.
Speaker 4: and growth in our SIC consumables.
Speaker 4: was offset by continued softness in the broader semi-industry, impacting our advanced packaging and SMT contribution in the short term.
Speaker 4: Overall, we remain excited about the long-term opportunities across all of our businesses. Within the semi-division, while we are currently transitioning through a downturn in the spending cycle for our semi-products, our competitive position in the industry remains strong.
Speaker 4: which create an opportunity to capture additional upside in the next investment cycle. Fortunately, we continue to experience strong demand for high-temperature built furnaces for EV applications.
Speaker 4: demand driver as the industry gradually builds out wafering capacity to serve the immense opportunity ahead.
Speaker 4: and trepid's cleaning equipment.
Speaker 4: versus cleaning equipment.
Speaker 4: Sorry about that. Fortunately, we continue to experience strong demand for... Oh, let me back up. Within the materials and substrate division, SIC remains a key demand driver as the industry......
Speaker 4: share across our individual solutions, as well as Amtech share in the overall SIC market.
Speaker 4: While only one quarter into the integration of Entrepix, thus far we are tracking the plan and have seen very positive results with the collaborative efforts across our various SIC businesses.
Speaker 4: We are encouraged with a level of dialogue and engagement across both existing and new customers and the long-term opportunities they represent.
Speaker 4: In summary, we are increasingly optimistic that our semi-division reach an overall demand trough in the first fiscal quarter, while demand in our materials and substrate divisions remain strong given the health of the SIC consumables and the broad-based interest in entrepixous cleaning equipment.
Speaker 4: these growth areas across multiple product and customer touchpoints creates a strong and durable foundation for value creation in the coming years. I will now turn the call over to Paul to go into more detail on our end markets.
Speaker 4: and customer touch points creates a strong and durable foundation for value creation in the coming years. I will now turn the call over the call to go into more detail in our end markets. Thank you Michael.
Speaker 4: Expanding further on the demand environment, we continue to remain in this overall demand trough for advanced packaging and SMT products. Offsetting this is continued higher demand for high tent belt furnaces.
Speaker 4: primarily used in EV applications. While we have received additional new orders for advanced packaging equipment from a leading OSTAC customer, we remain cautious about the timing of a demand rebound for these products. Given the uncertainty...
Speaker 4: around the macroeconomic outlook, specifically within a semiconductor industry. Within our materials and substrate division, we continue to see a strong demand for our products. Specific to silicon carbide, demand for our consumable products continue to grow and line with estimates for overall industry, way for capacity.
Speaker 4: As a reminder, in this portion of the market, Amtech has been a leader for many years with existing relationships across both industry leaders and newer entrants. Given the superior performance attributes of our consumables, which translates to a roughly 2X improvement in total cost of ownership, customers tend to gravitate to our solutions.
Speaker 4: particularly as volumes increase. With that said, the pace of silicon carbide wafer capacity additions is often longer than that of traditional silicon. And it will take time for the wafer output of the industry to realize the robust growth and wafer starts that are currently forecasted.
Speaker 4: As it relates to our cleaning tools which were required as part of in trepics, we continue to see strong demand in the silicon carbide market as customers execute on the capacity expansion plans.
Speaker 5: We recently booked our 20th Way for Cleaning System for Silicon Carbide customers and continue to engage existing in new customers for future orders.
Speaker 5: And Trapix was an early mover into the silicon carbide market, starting with the shipment of refurbished wafer cleaning systems into existing faps. By leveraging the experience and know how developed from servicing these legacy tools, including CMT machines.
Speaker 5: Entrepix developed a new On-Track double-sided scrubber, which is ideally suited for compound semiconductor applications with configurations for 100 to 200 millimeter wafers.
Speaker 5: We believe the ongoing success of this new tool shows the strength of Entrepix's position in this important market segment.
Speaker 5: As we discussed last quarter, with the growing demand for North America manufactured products, namely our silicon carbide templates and consumables and high temp belt furnaces, we have taken initial steps towards supply chain and manufacturing optimization to expand internal capacity, and we have taken initial steps towards the supply chain and manufacturing optimization to expand internal capacity.
Speaker 5: strengthening our supply chain for greater resiliency and efficiency, including greater utilization of outsourced manufacturing partners.
Speaker 5: Well, these initiatives will take time to fully implement. Our goal is to both ramp capacity to better serve our current backlog and reduce lead times for new orders while diversifying our geographic, manufacturing, footprint to ensure business continuity. The near term demand for our products may meet.
Speaker 5: silicon carbide applications and high temp furnaces remains very robust. While over the mid to long term we believe we are well positioned to participate in the growth of both silicon carbide and the semiconductor industries when the capacity investment cycles return.
Speaker 3: I'll now turn the call over to Lisa to review our financial results. Thank you, Paul. Net revenues for the quarter were $33.3 million, an increase of 55% sequentially and an increase of 21% from the second quarter of fiscal 2022. The increase is primarily attributable to additional revenue from intrepics of $6.3 million.
Speaker 3: and increased shipments of our high temperature belt furnaces.
Speaker 3: compared to the second quarter of fiscal 2022. Selling, general, administrative, or SG&E expenses increased $2.2 million on a sequential basis and $4.7 million compared to the prior year period, due primarily to $1.5 million in acquisition costs.
Speaker 3: $7 million in amortization of intangible assets, as well as increased consulting and ERP project expenses. Compared to the prior year period, the increase in SG&A is due primarily to $1.9 million of added SG&A from Entrepix and $1.5 million of transaction expenses related to the acquisition.
Speaker 3: Research, development, and engineering increased $0.1 million sequentially and decreased $0.3 million compared to the same prior year period. Gap operating income was $0.5 million compared to gap operating loss of $2.7 million in the first quarter of fiscal 2023 and gap operating income of $2.6 million in the same prior year period. Even more shunting the shiny claim out of stay down burns car just stops
Speaker 3: The company has incurred amortization of intangible assets included in its GAAP financial statements related to the acquisition of a Trepix.
Speaker 3: The amount of an acquisition's purchase price allocated to intangible assets and the term of its related amortization can vary significantly, and the amortization is non-cash. The purchase price allocation reflected in our GAAP financial statements is preliminary. The company expects to incur amortization of acquired intangible assets with the
Speaker 3: for restructuring and severance, stop-based compensation, and acquired intangible amortization expense and transaction expenses related to our acquisition of Entrepix with $3.2 million compared to non-GAAP operating loss, $1.7 million in the first quarter of fiscal 2023.
Speaker 3: and non-GAAP operating income of $2.7 million in the same prior year period. Income tax benefit was $2.9 million for the three months ended March 31, 2023, compared to a benefit of less than $1 million in the preceding quarter and expense of $0.7 million in the same prior year period.
Speaker 3: The income tax benefit in the three months ended March 31, 2023 includes a one-time benefit of $3.2 million as a result of the release of a portion of our valuation allowance in connection with a deferred tax liability relating to the intrepix acquisition, resulting in recognition of previously recorded deferred tax assets.
Speaker 3: Gap net income for the second quarter of fiscal 2023 was $3.2 million, or 23 cents per share.
Speaker 3: This compares to gap net loss of $2.7 million or 20 cents per share for the preceding quarter and gap net income of $2 million or 14 cents per share for the second quarter of fiscal 2022.
Speaker 3: non-GAAP net income for the second quarter of fiscal 2023 was $2.7 million, or $0.19 per share. This compares to non-GAAP net loss of $0.7 million, or $0.5 per share for the preceding quarter, and non-GAAP net income of $2.1 million, or $0.15 per share for the second quarter of fiscal 2023.
Speaker 3: of Entrepix.
Speaker 3: Approximately 67% of our cash balance of March 31, 2023 is held in the United States. With the acquisition of Entrepix, our cash levels are lower, but we are comfortable that we have the capital available to fund our operations and fuel our future growth, including our access to a revolving line of credit of up to $8 million.
Speaker 3: To date, we have not borrowed any amounts under the Revolt. Now turning to our outlook. Operating results can be significantly impacted, positively or negatively, by the timing of orders, system shipments, logistical challenges, and the financial results of semiconductor manufacturers. To date, we have not borrowed any amounts under the Revolt.
Speaker 3: Additionally, the semiconductor equipment industries can be cyclical and inherently impacted by changes in market demand. The results may differ materially in the weeks and months ahead.
Speaker 6: Revenues are expected to be in the range of $31 million to $33 million, with operating margins slightly positive.
Speaker 6: A portion of Amtech's results is denominated in RMBs, a Chinese currency. The outlook provided is based on an assumed exchange rate between the United States dollar and the RMB.
Speaker 6: Changes in the value of the RMB in relation to the United States dollar could cause actual results to differ from expectations.
Speaker 2: a question and answer session. If you'd like to ask a question please press star and then one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and then two if you would like to remove your question from the queue.
Speaker 2: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker 2: Our first question is from Mark Mullen of the benchmark company. Please go ahead.
Speaker 7: I'd like to give you my congratulations on your acquisition of Intrepid. I do have a couple questions. Several of the semi-firms I talked to this quarter are believing that this is the trial quarter for the semiconductor equipment business. Do you share those feelings or do you – I'm just wondering where you feel we are in the cycle.
Speaker 4: Hi Mark, thanks for joining us today.
Speaker 4: From what we see and what we hear from our customers, we do feel we're at the bottom of the cycle.
Speaker 4: little lights of hope, movement into a more upward direction, but given our visibility, it's hard to say when that rebound will occur. So if you remember last quarter, we had that nice order from the OSATS, and that could lead into something later in the end of this year is what we're hoping. For more information, visit www.osats.com
Speaker 4: based on what we're hearing.
Speaker 6: I'm looking at your material and substrate gross margins. They were down significantly year over year and also sequentially. Is that related to the Entrepix acquisition or some other product mix? Mark, that is correct. Addigan Entrepix, who has more of the capital equipment in their product line, is bringing that.
Speaker 7: and then another figure somewhat later, which are scheduled for amortization.
Speaker 6: So, yes, so the 945,000 is what we expect to incur through the end of this calendar year. Again, you know, this is a preliminary, these are preliminary numbers. We have some time, obviously, to finalize. And then after the end of this calendar year, we expect approximately 400.
Speaker 8: in one now.
Speaker 2: Thanks James. We have no further questions from the queue.
Speaker 2: That concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.