Amtech (NASDAQ:ASYS) Misses Q3 Analysts' Revenue Estimates, Stock Drops

Radek Strnad /
2023/08/09 4:17 pm EDT

Semiconductor production equipment provider Amtech Systems (NASDAQ:ASYS) fell short of analysts' expectations in Q3 FY2023, with revenue up 54% year on year to $30.7 million. Amtech made a GAAP loss of $1.03 million, down from its profit of $10.2 million in the same quarter last year.

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Amtech (ASYS) Q3 FY2023 Highlights:

  • Revenue: $30.7 million vs analyst estimates of $32.9 million (6.42% miss)
  • EPS: -$0.07 vs analyst estimates of $0.03 (-$0.09 miss)
  • Free Cash Flow was -$2.77 million compared to -$3.57 million in the previous quarter
  • Inventory Days Outstanding: 160, down from 162 in the previous quarter
  • Gross Margin (GAAP): 35.7%, up from 29.6% in the same quarter last year

“I am excited to take on the role of CEO and am looking forward to leading Amtech and driving efforts to fully capitalize on the exciting growth opportunities before us. In the coming quarters, we will focus our efforts on operational and supply chain improvements to ensure that we create meaningful value from the secular drivers influencing our business. We will be outlining our targets and plans in more detail on our next earnings call,” commented Mr. Bob Daigle, Chief Executive Officer of Amtech.

Focusing on Silicon Carbide and Power Semiconductor sectors, Amtech Systems (NASDAQ:ASYS) produces machinery and related chemicals needed for manufacturing semiconductors.

The semiconductor industry is driven by demand for advanced electronic products like smartphones, PCs, servers and data storage. The growth of data and technologies like artificial intelligence, 5G networks and smart cars are also creating a next wave of growth for the industry. To keep up with ever changing customer needs requires new tools that can design, fabricate and test at ever smaller sizes and more complex architectures, and that is driving the demand for semiconductor capital manufacturing equipment.

Sales Growth

Amtech's revenue growth over the last three years has been strong, averaging 22.8% annually. But as you can see below, this quarter wasn't particularly strong, with revenue growing from $20 million in the same quarter last year to $30.7 million. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).

Amtech Total Revenue

Despite missing analysts' estimates this quarter, Amtech's 54% year-on-year revenue growth was objectively impressive. We believe the company is still in the early days of an upcycle, as this was just the second consecutive quarter of growth and a typical upcycle tends to last 8-10 quarters.

The pandemic fundamentally changed several consumer habits. There is a founder-led company that is massively benefiting from this shift. The business has grown astonishingly fast, with 40%+ free cash flow margins. Its fundamentals are undoubtedly best-in-class. Still, the total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.

Product Demand & Outstanding Inventory

Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business' capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.

Amtech Inventory Days Outstanding

This quarter, Amtech's DIO came in at 160, which is 12 days above its five-year average. These numbers suggest that despite the recent decrease, the company's inventory levels are higher than what we've seen in the past.

Key Takeaways from Amtech's Q3 Results

With a market capitalization of $148.9 million, Amtech is among smaller companies, but its more than $14.3 million in cash on hand and near break-even free cash flow margins puts it in a stable financial position.

It was generally a negative quarter for Amtech. Revenue unfortunately missed analysts' expectations and its operating margin shrunk. Additionally, guidance for next quarter was extremely vague, with the company saying "for the fourth fiscal quarter ending September 30, 2023, we expect revenue and operating profit to improve incrementally over the third quarter of fiscal 2023." It seems like Wall Street's expectations are for more meaningful improvement, although again, the vague language rather than specific ranges makes it hard to tell. Overall, the results could have been better. The company is down 7.2% on the results and currently trades at $9.93 per share.

Additionally, the company announced that the CEO is stepping down, effective immediately. The company stated that "Michael Whang stepped down as Chief Executive Officer, effective August 8, 2023. The board has appointed Bob Daigle, current Chairman of the Board, with the additional role of Chief Executive Officer, effective August 8, 2023. To support the transition, Mr. Whang will remain as an advisor until February 8, 2024. "

Amtech may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 50% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned in this report.