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

Full Report / August 09, 2023

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.

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

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

Amtech Systems was founded in 1981 by Jong S. Whang, who previously had experience in both semiconductor processing and manufacturing. The company went public in 2017.

Semiconductor manufacturing begins with a silicon wafer upon which chips are constructed through the application and manipulation of thin layers of film that act as conductors, semiconductors, or insulators. It is a complex process requiring precision tools, specific temperatures at various stages, and ideal environments. Deviations in materials, measurements, or temperatures could result in defects that cost money, time, and other resources.

Amtech's product portfolio primarily focuses on thermal systems and wafer polishing equipment. The company’s horizontal furnaces address the vital fabrication stages of diffusion, oxidation, and annealing. Diffusion is an early stage that uses heat to remove impurities from wafers, oxidation employs high temperatures to turn silicon on the wafer into silicon dioxide to produce insulation properties, and annealing involves heating wafers to change their electrical properties. Amtech's polishing products abrade wafers in a high-precision manner to ensure the flatness, parallelism, and surface finish needed for chip construction.

Companies offering competing semiconductor production equipment include Centrotherm, CVD Equipment (NASDAQ:CVV), Vitronics Soltec, and Rehm Thermal Systems.

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.

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.

Pricing Power

In the semiconductor industry, a company's gross profit margin is a critical metric to track because it sheds light on its pricing power, complexity of products, and ability to procure raw materials, equipment, and labor. Amtech's gross profit margin, which shows how much money the company gets to keep after paying key materials, input, and manufacturing costs, came in at 35.7% in Q3, up 6.2 percentage points year on year.

Amtech Gross Margin (GAAP)

Amtech's gross margins have been trending up over the last 12 months, averaging 38.4%. This is a welcome development, as Amtech's margins are below the industry average, and rising margins could suggest improved demand and pricing power.


Amtech reported an operating margin of 1.4% in Q3, down 13.6 percentage points year on year. Operating margins are one of the best measures of profitability because they tell us how much money a company takes home after manufacturing its products, marketing and selling them, and, importantly, keeping them relevant through research and development.

Amtech Adjusted Operating Margin

Amtech's operating margins have been trending up over the last year, averaging 2.8%. This is a welcome development for Amtech, who needs to improve its cost structure and subpar margins.

Earnings, Cash & Competitive Moat

Wall Street expects earnings per share to decline 22.9% over the next 12 months, although estimates will likely change after earnings.

Although earnings are important, we believe cash is king because you can't use accounting profits to pay the bills. Amtech's free cash flow came in at -$2.77 million in Q3, down 153% year on year.

Amtech Free Cash Flow

As you can see above, Amtech failed to produce positive free cash flow over the last 12 months and shareholders will likely want to see an improvement in the coming quarters.

Over the last five years, Amtech has reported an average return on invested capital (ROIC) of just 2.81%. This suggests it struggled to find compelling reinvestment opportunities within the business.

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. "

Is Now The Time?

When considering an investment in Amtech, investors should take into account its valuation and business qualities as well as what's happened in the latest quarter. We cheer for everyone who's making the lives of others easier through technology but in the case of Amtech, we'll be cheering from the sidelines. Its revenue growth has been strong, and that growth rate is even expected to increase in the short term. Unfortunately, its relatively low ROIC suggests suboptimal profitability prospects and its operating margins reveal subpar cost controls compared to other semiconductor businesses.

Amtech's price-to-earnings ratio based on the next 12 months is 16.1x. While we have no doubt one can find things to like about the company, we think there might be better opportunities in the market and at the moment don't see many reasons to get involved.

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