Amtech Systems, Inc. (ASYS) on Q1 2021 Results - Earnings Call Transcript
Operator: Good day, and welcome to the Amtech Systems' First Quarter 2021 Earnings Conference Call. Please note that this event is being recorded. I'd now like to turn the call over to Erica Mannion of Sapphire Investor Relations.
Erica Mannion: Good afternoon, and thank you for joining us for Amtech Systems' Fiscal First Quarter 2021 Conference Call. With me today on the call are 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 company's website at www.amtechsystems.com 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 in the forward-looking statements are: Changes in the 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 risks; 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 Form 10-Q.
Michael Whang: Thank you, Erica. Amtech delivered strong results in the first quarter with revenue of $18 million, coming in at the high end of our expectations, driving a return to overall profitability and cash flow generation. Activity within the semi markets continued at a strong pace, most notably with our customers in the Asia Pacific region, who are continuing to make capacity investments. Within this market, advanced packaging applications remain a primary driver of demand. Current market forecasts indicate a strong outlook for the broader semi industry in 2021, and we are seeing this translate to order activity in our products. At this point, demand is approaching capacity at our Shanghai facility, and we are exploring options to add incremental manufacturing capacity as needed. While this market is performing very well for Amtech, it is worth noting that this only comprises a portion of demand within our overall semi segment. For the other two core product lines within the segment, principally our custom high intent furnaces, which are used for a variety of thermal processing applications and a horizontal diffusion furnace or power chip applications dialogue with customers tended to increase along with quoting activity. For these markets, we are seeing an increase in activity in both 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 looking forward with their capacity expansion plans, including we've continued transitioning from 200-millimeter to 300-millimeter process lines. In the first quarter, we shipped the follow-on order for a clustered 300-millimeter horizontal diffusion furnace system and are now in the process of bringing that system online. In addition, we are starting to see supply chain shortages for automotive semiconductors translate to an increase in quoting activity. While many of these projects are multiyear initiatives, that were 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 2021. We are very pleased with the performance of our semi segment so far this year. Following the year, strong growth in advanced semi packaging applications in 2020, we are seeing demand continue into 2021 with the layering of incremental high temp furnace and power semi orders helping to drive the upside.
Lisa Gibbs: Thank you, Michael. Net revenues increased 19% sequentially, primarily attributed to the shipment of our 300-millimeter clustered HTR diffusion furnace to a top-tier global power semiconductor customer, as announced previously. While our book-to-bill was roughly equal in the first quarter, it is important to note that revenue in the first quarter included this large diffusion furnace shipments. Adjusting for this, our book-to-bill ratio would have been closer to 1.2:1, demonstrating the strength we are seeing in the power semi market. Gross margin increased in the first quarter of fiscal 2021 to 42% compared to 33% in the fourth quarter of fiscal 2020. This was primarily due to favorable product mix, most notably strong shipments of our larger advanced packaging products.
Operator: . And we'll take our first question today from Jeff Osborne with Cowen & Company.
Jeffrey Osborne: Great to hear about the quoting activity picking up. And congratulations on the results. A couple of questions on my end. 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?
Michael Whang: Jeff, thanks for joining us. Thanks for your question. There is a certain degree of urgency and frequency that we have been experiencing started from last quarter and on to the current period. So -- so I'm heartened, also encouraged with what's on the pipeline. And I can't wait to see what comes about in the future.
Jeffrey Osborne: Got it. And then can you just -- so you had 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-30s. I assumed you knew that order was coming in. So what else was a factor there to get to close to 42% versus the mid-30s guidance?
Lisa Gibbs: Thanks, Jeff. It really was -- it wasn't necessarily that order. We certainly knew that order was going out this quarter. It was a product mix that occurred a little bit later in the quarter of our much larger advanced packaging products that have a very nice margin profile for us.
Jeffrey Osborne: Got it. And then I'm trying to understand, you had a good 8 to 10 quarters in a row of sort of mid-30s gross margin to low 40s for the LED and silicon carbide segment. And then last quarter, in September, it was 15% and then 25%. Is that because of the expansion that you did in Pennsylvania at PR Hoffman that there's some production or yield issues or what's going on there? Or is this a new normal?
Lisa Gibbs: It's a combination of the increased capacity. So we have some additional rent expense and some new equipment and depreciation that's impacting that. And certainly, as that growth occurs, we certainly expect the gross margins to return to normalized levels.
Jeffrey Osborne: So that might take a few quarters? Is that a safe assumption?
Lisa Gibbs: That is a safe assumption.
Jeffrey Osborne: Got it. And then how should we be thinking about with the relocation in Shanghai with the old BTU facility? How do we think about OpEx? Are you hiring a lot of people to gear up for this growth? Is there any new products that require any incremental expenses that we should be thinking about?
Lisa Gibbs: 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 can help manage. And we're using some external help as well. I don't expect significant impact on the OpEx side. There will be some CapEx that will happen in kind of that mid- to late summer time frame as we do a fairly significant build-out. When you lease the building in China, you lease it empty. So there will 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, $2.5 million range.
Operator: At this time, we will conclude today's call. Thank you for your participation. You may now disconnect.
