Good day, and welcome to the Amtech Systems Fiscal 2012 Second Quarter Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Brad Anderson, Chief Financial Officer. Please go ahead.

Good afternoon, and thank you for joining us for Amtech Systems' Second Quarter Fiscal 2012 Results Conference Call. On the call today are J.S. Whang, Amtech's Executive Chairman; Fokko Pentinga, our Chief Executive Officer and President; and myself, Brad Anderson, Chief Financial Officer. After the close of market trading today, Amtech released its 2012 financial results for the quarter ending March 31, 2012. The release will be posted on the company's website at amtechsystems.com. During today's call, management will make forward-looking statements. All such forward-looking statements are based on information available to us as of this date, and we assume no obligation to update any such forward-looking statements. These statements are not guarantees 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 our customers and competitors; change in volatility and the demand for our products; the effect of changing worldwide political and economic conditions on government-funded solar initiatives; capital expenditures; production levels, including those in Europe and Asia; the effect of overall market conditions, including the equity and credit markets; and market acceptance risks. Other risk factors are detailed in our Securities and Exchange Commission filings, including our Forms 10-K and 10-Q. Let me quickly highlight the agenda for this discussion. J.S. Whang, our Executive Chairman, will first discuss our long-term strategies and highlight what we see in the marketplace as we evaluate growth opportunities. Fokko Pentinga, our Chief Executive Officer, will update you on the current market, how we are addressing the challenging market and discuss the progress in our technology and product development roadmap. I will then discuss second quarter financial results, year-over-year sequential trends and our outlook for the June quarter. So I will now turn the call over to J.S. Whang, our Executive Chairman, to begin the discussion.

Thank you, Brad. Good afternoon, everyone. Thank you for joining us today. We really appreciate your interest in Amtech Systems. As we have said before, our long-term objective is to continue to be a market leader by offering highly cost-effective, leading-edge technology solutions to current and prospective customers in the Solar Semiconductor and LED market, plus, but importantly, to expand our offerings in those markets and further diversify our future revenue stream. At the beginning of this year, we announced my Executive Chairman role and appointment of Fokko Pentinga to our CEO. I am pleased to report that as we planned for, this transfer of leadership to Fokko has been a very smooth transition for the entire global operations. The result is that I am now dedicating more of my time to investigating new opportunities for the company. The focus is on opportunities for increasing our total available market. Our Board and management have a solid plan for long-term success. We have well-defined objectives that are understood across our global organizations. We continue to work each day for tomorrow and beyond, and we are investing in our future and we'll continue to do so. As we explore our market opportunities, our objective is to deliberately pursue strategic acquisitions to expand the size of the market we serve, diversify our end market mix and reduce our exposure to any single market. The ultimate objective will be to moderate the cyclicality in our business and better position the company to realize more consistent growth through cycles in the future. We see interesting strategic opportunities in solar, as well as in the semiconductor and LED markets. Let me now discuss our acquisition growth plan. Although I cannot specifically detail our pipeline, our goal is not just the growth, but to add the right…

Thank you, J.S. In this second quarter, we continue to operate in a very difficult, low-demand marketplace. We maintained the highest level of service in our streamlined organization. We have restructured the manufacturing operations to best align cost with current and near-term low demand. We have reduced our total headcount by almost 30%, while at the same time increasing our ion implant operations in China and our semiconductor operations. Within our Solar divisions, we have reduced headcounts by over 40%. We have, and will continue, to address all discretionary expenditure to minimize any potential excess in any part of our global operations. I want to emphasize though, that the plan to maintain the expert talent needed in all core functional areas. We are well positioned to successfully manage through this period, plus our core is strong and I believe our current structure is scalable both up and down. So when the opportunity arises to deliver into higher levels of demand, we are ready too. Bookings were up modestly in the quarter relative to our first quarter. However, the improvement spread we'll detail later on, was not indicative for an uptake turn in the solar market overall. Important is that we hold our strategic course and continue to invest in our research and product development activities through this slower sales environment. Let me now address some of the key development programs. First, our solar ion implant. We are developing a solar ion implant to provide our customers with a more complete solution for the next-generation high-efficiency solar cell production and as a possible upgrade to their existing solar cell manufacturing lines. We continue to be encouraged by the positive feedback from selective potential customers. Next week at the Shanghai Solar Show, we will unveil our ion implant system. We are excited…

Thanks, Fokko. Let's review our second quarter results. Net revenue for the second quarter of fiscal 2012 was $21.6 million, down 13% sequentially from $24.7 million for the preceding quarter, and down 65% from the second quarter of fiscal 2011. The decrease was in line with our expectations and was driven by lower system shipments to customers in the solar industry. We were encouraged by our semiconductor revenue for the quarter which totaled $11 million, a 36% increase from last year's quarter and a 21% increase sequentially. Total orders in the second quarter of fiscal 2012 were $18 million, $7.2 million of which were Solar. This is up 62% compared to total orders of $11.1 million in the preceding quarter. At March 31, 2012, our order backlog was $67.4 million compared to total backlog of $69.2 million at December 31, 2011. Total backlog at March 31, 2012, was $54 million compared to a Solar backlog of $55.8 million at December 31, 2011. The effect of foreign exchange on backlog was a positive $1.8 million in the March quarter. Backlog includes deferred revenue and customer orders that are expected to shift within the next 12 months. Gross margin in the second quarter of fiscal 2012 was 19% compared to 29% sequentially, and 40% in the second quarter of fiscal 2011. The lower gross margin is primarily due to lower sales volumes resulting in less-efficient capacity utilization and the write-down of inventory. Also, our net recognition of previously-deferred revenue was lower in the second quarter compared to the first quarter. Looking at our SG&A expenses. In the first quarter of fiscal 2012 were $6 million -- in this quarter, $6 million, compared to $6.3 million in the preceding quarter, and $11.2 million the second quarter one year ago. The decrease in our…

[Operator Instructions] The first question comes from Colin Rusch of Thinkequity.

Can you talk a little bit about your expectations for how long you'll have those initial products out, testing with customers, before you begin to see orders?

I assume you talk about specifically the ion implant, but it's -- the time needed for machines to get full acceptance, meaning in production, and expectation is that at least it will take 6 months' time before you fully qualify machines in the production environment, and that counts for most products. PECVD can be a little bit shorter, but also there's a certain time needed. So that's about the timeframe you're looking at.

All right. And then on the order backlog, can you break out how much of the solar orders are deferred revenue, and how much are actual shipments that are yet to come?

I don't have that number in front of me, but I can get that to you offline.

Okay. And then just the last one. On R&D expense, when do you think you'll start to see that higher R&D spend start to wind down a bit?

Well, that depends on timing of -- as I mentioned in the prepared remarks, we expect it to be higher because of the beta tool and we may, depending on whether we build another beta tool and where we're at from a technology development, we actually are, right now, expensing all material costs related to both the prototype, the alpha and the 2 beta tools that are -- we're in the process of starting to build. So, as I mentioned, the June quarter is going to be higher, going to be off with that in the September quarter. Maybe our expectations is within 1 quarter or 2, we should be able to be back down to a complete lower level.

The next question comes from Jeff Osborne of Stifel, Nicolaus.

Fokko, I was wondering, maybe if you could give us the high points on the PECVD tool and what do you think the advantages are versus the current incumbent that dominates the space?

The PECVD tool in business is the batch, the tube-type batch tool, which is comparable to some other big companies who provide this type of equipment. And first of all, compared to the in-line tools, on average, we see that it gives a few tenths of a percent better efficiencies and a much better cost of ownership. So compared to most of the large in-line tools, that is the advantage. That's also why we moved away from the in-line towards this tube-type batch. And the tube-type batch has the advantage that, like with most batch systems, you can do -- we have time to do different things. You don't have to take very quickly, just one layer, but you can do more than that. So it's -- we see it also very important for the future to have the -- anti-reflection layers that do not have thin holes, and that can be important for future steps when they come, for example, with its plating [ph]. And we see good possibilities with process development, which we do as the energy research center as you know to get just better efficiencies even more than we see today.

Okay, and a couple for Brad. Brad, the gross margin guidance, does that include the $1.9 million inventory charge? So when you're looking at an apples-to-apples comparison of gross margins versus this most recent quarter, should we back that out or not? Do you have additional inventory charges coming out in the upcoming quarter?

The guidance is really comparing the gap gross margin, which was 19% to what we expect, which we expect it to be in line or even higher than that. So as far as future write-downs, I mean, of course, you take your best estimate based on what you know at the end of each quarter and we could -- we've done that in the past, and we'll continue to do that. But I think, yes, we took what we believe to be the appropriate write-down in reserve on inventory.

And was that raw material inventory or with -- or finished goods?

Well, for our products though [ph], we're primarily parts, what we call parts/raw material.

Okay. And then Colin asked about the R&D side, which is understandable if you build the second beta or not. Can you talk about what your expectations are for SG&A in the second half?

Well, let's put that a little bit on the F side, those costs tend to be a substantial portion of it tend to be variable, because we still have a commission-based sales force, we also look at, as we mentioned in our prepared remarks, shipping costs are variable compared to the volumes. So we see that continuing to be managed just fine. And we'll look at the other parts of selling, whether in-house tradeshow, related travel costs, we continue to evaluate that. On the G&A side, trend-wise, we continue to look at incremental steps to reduce those costs. But I would say, overall, we took a lot of steps early on in the process back in the, I'd say, almost towards the end of our last fiscal year. But trend-wise, they'll see really significant changes.

All right, perfect. I wasn't sure what's in your products if you're going to step on the gas there a little bit. But 2 other ones, quickly, for Fokko. Can you give us a sense of the orders within Solar, what the profile of the type of customer that is buying in this type of environment? Are they Taiwanese, Korean, Chinese, data and enterprises, that was question one. And then question two is, in particular, with the semi strengths sequentially, do you have a sense of which end market that was going to?

Okay. First, the question about what sort of customer is buying. And let's say it this way, the ones that are less directly subjected to the present pressure in the markets are the ones that have the highest chance. So that would follow in that last category of what the alternatives you gave. Some of them have their own markets so that makes it a little bit easier. And on the semi side, yes, we do know which type of product it is, that's more of the analog. And we also have good hope that, that will continue for some time. Of course, it's also -- the semi is up and down, and we don't have a very large number of customers. But so far, that looks good and it's all on the analog side.

[Operator Instructions] The next question comes from Howard Halpern of Taglich Brothers.

Just, I guess, want to get maybe a sense of the big picture down the road when things start to turn up. What do you envision the ion implant market to be, say, 2 years down the road and the LED and the prospects for the LED market and getting into that, and what does that look like for the future?

Okay. First, on down the road 2 years from now and on the ion implant. And of course, there are analysts that give numbers like that but our expectation is that 2 years from now, 2, 3 years from now, the numbers will be worldwide, what's the number? 40, 50 in that range that is expected that, that market is about $50 million to $100 million. But things could go quicker. And we see a lot of interest in ion implant. And of course, it also depends on how successful that goes into production. So far, cost of ownerships have always been high and that holds it back a little bit and we hope that we can prove that the COO of the product is better, so that could also accelerate it quite a bit. So that is also partly dependent on our own success, how quickly a product like this could be set in production in large volumes. And in LED, we have limited activity in LED and we're looking at ways to broaden that. But to give an estimate on how much that could give in the near future, I wouldn't be able to give that at this moment.

Okay. Are there any other, besides LED, that you're starting to inquire? So you investigate actually, kind of look at to broaden the portfolio of products in industries that you serve?

We say it was in the existing operations, we don't plan to be outside the Semiconductor, Solar and LED. Of course, Semiconductor is something we're, in times when Solar is booming, you have less time. So it means that we put a lot more emphasis and getting more business out of the Semiconductor. So that's why on the short term, I would see from the existing operations a bit of a growth coming.

The next question comes from Gordon Johnson of Axiom Capital Management.

I'm just looking at your cash flow here -- I guess, not your cash flow, but your cash balance. I noticed it declined again sequentially. And I'm just looking at your days of inventory and your day sales outstanding. It looks like you have over 6 months of days in inventory and over 4 months of day sales outstanding. Is it possible? I know this question was, I guess, broached before, but is it possible that we could see incremental inventory and potentially receivables write-downs if the market doesn't improve?

I'll take that. I mean, there's -- are there always possibilities? There's always a possibility. I think we took a, I think, a healthy look at both the inventory and we always are evaluating our receivables, and I think we got them adequately stated at this time. And we continue to -- you look at our backlog which we have, and then you compare that to what we got in inventory, and it's not -- we're not in really too bad a shape there. So yes, you do days -- DSOs start to stretch out, sure. I mean, in this kind of environment that's expected with your customers and you continue to work with them. But we believe, what we've recorded on the books and the reserves that we have are appropriate and adequate at this time.

Okay. And then with respect to the cash balance, how do you guys see cash trending beyond this quarter, maybe into next quarter? And next year, will we start to see that cash balance start to improve or as long as the market remains weak, will we start to see it continue to trickle lower?

Yes, we haven't given any public comment on future cash. But of course, our objectives are to manage our inventory, get that, see that start to maybe start to turn around in the coming quarters and start reducing our inventory. But with your -- really at lower shipment levels, that takes a little bit more time. So we continue to work on that, and that is our objective and goal is to continue to manage the working capital, to rightsize it to the existing realities in the marketplace today and in the near future.

That's helpful, and then just one more. If you could let us know what your utilization rate was this quarter, and also kind of what you expect it to be next quarter? And maybe even if you could, what do you envision it being next year?

The utilization standpoint, of course, we're underutilized with our facility. I mean, we were -- a year ago, we were doing -- we did $70 million in the quarter, a little over less than a year ago. So downsizing and we've done a lot there, Fokko spoke to that. Our Solar-related divisions are down over 40% from the headcount standpoint. But we don't give any specific factory utilization rates, but obviously, we're substantially lower on utilization rates than we were 3 quarters -- 2 to 3 quarters ago.

And can you give us some guidance, like how we should expect that to trend maybe this year? And if you could, some incremental guidance on next year as well?

Well, from our remarks that we've made on the future, I think it's -- we have said that the market looks still low demand scenario in the near term, and we continue to manage that and we'll -- as we get into fiscal 2013 and calendar year '13, we'll obviously look at that and have a little more clarity as we get a little bit closer to that timeframe.

[Operator Instructions] The next question comes from David Dansfree [ph] of Janney Montgomery Scott.

I was just calling kind of to get back on the Solar order front. Every week it seems like we see panel manufacturers, reducing capacity, shuttering plants. But I did notice one of your larger customers, it was made plans to expand their capacity by roughly 40% in 2012 or 650 megawatts. It's just come out one [ph] -- I was just wondering if you all heard or seen anything related to this?

Yes, we've heard about it and it does not necessarily mean that we are fully involved in that. It is a potential, but not something we're -- if that is, we're talking about the same person as we expect you think. It is not for the new technology, it's for the older technology expansions. So yes, we know about it, but that's all I can say.

This concludes our question-and-answer session. I would like to turn the conference back over to Brad Anderson for any closing remarks.

Thank you for joining us today. We look forward to reporting to you again on our progress and appreciate your continued interest in Amtech. I'll be available for any questions you may have and welcome your follow-up calls. This concludes today's call. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.