Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Achieved record revenue of $34 million, despite challenging market conditions.
- Alfamation acquisition contributed $9.7 million in revenue, offsetting weakness in the semiconductor sector.
- Operating expenses came in below prior guidance due to lower commission expenses, reduced bonus accruals, and cost management efforts.
- Sequential improvement in back-end semiconductor orders, indicating potential recovery.
- Continued execution of a five-point strategy focusing on market diversification, product innovation, and leveraging application expertise.
Negative Points
- Gross margin of 40.6% was much lower than expected, driven by lower volume and less favorable product mix.
- Ongoing weakness in key markets such as semiconductor, Auto/EV, and industrials, which account for over 70% of sales.
- Backlog declined as the company worked through a portion of the acquired backlog from Alfamation.
- Revenue from the semiconductor sector fell 32% sequentially, reflecting significant market challenges.
- Expectations for the second half of 2024 are tempered, with some customers pushing out deliveries and a slower rate of order conversion.
Q & A Highlights
Q: Can you talk about the linearity of orders in the quarter? Was it broad-based softness throughout the quarter, or did things take a turn at a particular point?
A: Our order pattern followed typical trends, with the first month being relatively soft, improving in the second month, and the third month being the strongest. This is a normal pattern where more deals close towards the end of the quarter.
Q: Have customers given specific delivery dates for the pushout of deliveries, or is it more general?
A: Most pushouts were from Q2 to Q4, with customers wanting deliveries before the end of the year. We haven't seen much move into 2025.
Q: Is the integration of Alfamation largely completed, or is there more work to be done?
A: The integration is progressing well, but there is still work to be done to fully integrate Alfamation. It takes time, but we are pleased with the progress.
Q: Can you provide details on the $1.2 million in cost savings and how it will impact financial statements?
A: The $1.2 million in annualized savings is tied to the Ambrell business, which has been softer than expected. The savings will commence in Q3, with a good portion of the impact seen in that quarter.
Q: How tied is your Auto/EV business to unit volumes in the auto industry?
A: It varies across our businesses. For process technologies, it's a mix of capacity expansion and efficiency upgrades. For electronic test platforms like battery testers, it's more tied to production volumes. Alfamation's programs are mostly tied to new product launches and model year upgrades, less dependent on volume.
Q: How much of the Auto/EV business is tied to product launches versus production volume?
A: Before Alfamation, it was more tied to production volume. With Alfamation, it's skewed more towards model year releases. Roughly two-thirds of the business is tied to model year releases, and one-third to production volume.
Q: Can you provide more color on diversification endeavors, channel partner expansion, and green energy application expansion?
A: We are optimizing our go-to-market strategy with channel partner upgrades and management programs. In commercial space, our image capture solutions and thermal testing chambers are seeing success. For green energy, our induction heating team is promoting induction as a green alternative to gas furnaces, gaining traction with some nice wins.
Q: What are the expected impacts of the recent actions to right-size the business?
A: The actions should result in $1.2 million of annualized savings, starting to impact Q3. These measures are in response to the subdued demand for front-end semi solutions.
Q: What is the outlook for the semiconductor market, particularly for silicon carbide and gallium nitride?
A: Demand for front-end semi solutions supporting silicon carbide and gallium nitride is expected to remain subdued into 2025. However, we remain bullish on the long-term adoption of these technologies.
Q: How is the company managing through the current semiconductor cycle and sluggishness in Auto/EV and industrial markets?
A: We are focusing on diversifying markets, product innovation, and leveraging application expertise. Our diversification efforts are helping us manage through the current cycle, and we are making progress on the integration of Alfamation and capturing synergies.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
