Archive for the ‘GTAT Investor Information’ Category

Significant new developments related to GTAT’s sapphire operations will be revealed via WALLSTREETforensics within the next hour.

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  • Installed furnaces inside Mesa, AZ are estimated to exceed 2,500 tools
  • Apple Base Case Revenue likely to exceed $2B and $2.00 EPS
  • Sapphire boule size are estimated to approach 235 kg

GTAT is still waiting on the 4th and final prepayment is received from Apple. The delay in the receipt of the final prepayment is believed to be related to the ramp up of equipment of equipment inside the Mesa facility. The sapphire plant is expected to be completed in June, which should coincide with the receipt of the final prepayment from Apple.
 
My latest supply chain check indicated that GT has likely installed slightly more than 2,500 furnaces. Sapphire boule size is expected to range between 200 and 235 kg. Stephen Chin of UBS has been one of the most vocal analyst’s covering GTAT issued a note on May 28th related to the progress of GT’s sapphire operations in Mesa, AZ.
 
The UBS research note issued on May 28th indicated that any installed furnaces greater than 1,500 or boule size greater than 165 kg would likely result in an upside to its 2015 estimates of $1.30. UBS stated, “we believe 2015 has more chance for upside if the furnaces are indeed larger sized and there are more than we estimated.” My supply chain check indicates that the number of installed furnaces will be significantly larger than 1,500 and sapphire boule sizes will also be significantly larger than 165 kg, which will lead to major upgrades across the board from Wall Street analysts in the near future.
 
As a result of my most recent supply chain check I believe that the Mesa sapphire operations will have an ample supply to cover the iWatch, the 4.7” iPhone and the 5.5” iPhone with full sapphire cover glass in 2014. Additionally, the maximum sapphire screen capacity of the Mesa facility is likely to exceed 200m annual units. My most recent supply chain check confirms that GT’s sapphire business with Apple is likely to approach or exceed $2B annually, or $2.00 earnings per share using an estimated ASP of $10 per unit.
 
Current Wall Street models are only pricing in Apple business at $1b annual or $1.00 earnings per share. My latest supply chain check indicates that Wall Street will likely need to DOUBLE revenue, EPS estimates and price targets once the iPhone 6 and iWatch are released later this year covered in sapphire glass.
 
I am maintaining my $87.50 price target as well as my 2015 estimate for GTAT EPS at $2.84 based on $3.177B in sales, including just over $2B of sales from Apple versus $1.335B and $1.30 EPS currently being estimated by UBS.

Get in early and enjoy my top investment picks.

Brian Blair of Rosenblatt Securities May 27th report on the Asia supply chain spotted iWatch models with sapphire screens. Blair also indicated that TPK will make the touch panel for the iWatch. If Blair is correct that TPK will make the touch panel is it nearly a guaranteed lock that the iWatch will feature sapphire cover glass, which will serve as another catalyst for shares of GT Advanced Technology (GTAT).

TPK as it is the major supplier of the touch-on-lens (TOL) process that is required to work with sapphire-based cover glass. Apple’s WWDC begins on Monday June 2 and if Apple wants to introduce the iWatch you can expect GTAT and sapphire cover glass to be a major part of it.

 

Disclosure: I am long GTAT

 

Reminder: My PTT Research Forensics Newsletter that is scheduled to be published on Thursday June 5th at 3pm EST.

My Forensics Newsletter pricing is now available and a special 20% launch discount (for the first 48 hours) will be available when my Forensics Newsletter subscription goes on sale on Monday June 2nd at 12pm EST.

If you were wondering what my next pick will be. Here is my sneak peek summary:

My next pick is a company that is built on top of a strong foundation of intellectual property. My analysis of the company’s data and public comments indicate that a “major ramp” in future sales is just getting underway. The company’s C-suite is in the process of scaling up the business and preparing to manage a much larger and more complex company. The company has quietly created an integrated eco-system comprised of software and hardware that continues to extend its competitive edge over its largest competitors. The industry that the company primarily supports is in the early stages of what is expected to be an explosive and long-term growth cycle.

 

GTAT’s Recent Insider Selling

Each and every week I have been asked about insider selling and my answer has more or less been the same, “It doesn’t bother me”.  I do believe GTAT’s insider selling is partly a function of share price appreciation after two years without share price appreciation.  The other important item to consider is that a majority of the C-Suite compensation is tied up in stock grants that vest over time.  However, if you want to truly understand the overall amount of C-suite’ skin in the game it is important to not only look at the current vested shares but also the shares that have not vested.

If you looked closely at GTAT’s proxy information specifically page numbers 50 and 51, you would have noticed a nice schedule that details the number of non-vested shares for the executive team.

C-Suite “Non Vested” Shares

Thomas Gutierrez (CEO)- holds over 1.1 million shares that have not vested

Richard Gaynor (CFO) – holds over 379,700 shares that have not vested

Dan Squiller (COO) – holds over 746,000 shares that have not vested

Conclusion and Support 

The number of shares that have “not vested” for GTAT’s C-Suite truly staggering (see images below).  There have been several reports recently of insider sales of 100,000 or 200,000 share blocks at a time but those sales should not outweigh the fact that GT’s C-Suite has millions of dollars of “skin” still invested in the game.  The astounding amount of “non-vested” C-Suite shares should only give investors even more faith in management’s focus to increase shareholder value.  Management’s focus on the medium to long-term will not only increase the value of the C-Suite “non-vested” shares but also increase the net worth of GTAT longs, who plan on holding the stock over the next few years.

 

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Disclosure: I am long GTAT

 

Reminder: My PTT Research Forensics Newsletter that is scheduled to be published on Thursday June 5th at 3pm EST.

My Forensics Newsletter pricing is now available and a special 20% launch discount (for the first 48 hours) will be available when my Forensics Newsletter subscription goes on sale on Monday June 2nd at 12pm EST.

If you were wondering what my next pick will be. Here is my sneak peek summary:

My next pick is a company that is built on top of a strong foundation of intellectual property. My analysis of the company’s data and public comments indicate that a “major ramp” in future sales is just getting underway. The company’s C-suite is in the process of scaling up the business and preparing to manage a much larger and more complex company. The company has quietly created an integrated eco-system comprised of software and hardware that continues to extend its competitive edge over its largest competitors. The industry that the company primarily supports is in the early stages of what is expected to be an explosive and long-term growth cycle.

 

 

GT Advanced Technologies (GTAT) is making a structural change at the head of its finance division by recruiting a CAO.  The move signals the end of the dual title of CFO/CAO that has persisted over the last several years.  GT named Raja Bal as Chief Accounting Officer (CAO) and “successor” CFO on January 16th, 2014.  Raja Bal succeeded Richard Gaynor as GT’s CFO on March 7th, 2014.  GT is currently in the process of transforming its business and becoming a “high growth, multi-national/global, diversified high technology manufacturing company”.

GT’s latest move should free up the Raja Ball from the day-to-day accounting operations and allow him  to focus on the company’s strategic initiatives.  The new CAO will be taking over GT’s day-to-day accounting functions of the organization and will also be responsible for managing GT’s quarterly and annual financial reporting.  The CAO will also “support the selection, negotiation and due diligence processes for acquisition targets”.    Additional CAO position details are listed below:

The ideal candidate will have a minimum of 5 years’ experience as a CAO / Corporate Controller with 15-plus years of progressive financial management experience with publicly traded, high growth, multi-national/global, diversified high technology manufacturing companies.

Provide leadership and oversight of all aspects of the controllership and accounting functions of the organization including payroll, accounts payable, billings and receivables, internal audits, external audits, and SOX requirements.

Be responsible for timely and accurate dissemination of financial reports and leadership highlighting major issues and trends and commentary on variances from plan, prior year and forecast.

Expertise in issues specific to high volume manufacturing environments including cost accounting, factory cost pools, standard cost, variance analysis and overhead absorption. Demonstrated ability to drive product cost reduction and operating expense rationalization initiatives.

Manage quarterly and annual reporting including the completion of financial statements and footnotes, management’s discussion and analysis encompassing review of all new accounting matters, application of judgment, and significant matters for discussion with disclosure committee.

Impeccable integrity; words and actions must continually reinforce this characteristic.

Support the selection, negotiation and due diligence processes for acquisition targets. Oversee and coordinate the financial and accounting diligence efforts and integration process. Manage consolidation of accounting and reporting requirements for acquisitions.

Exceptional communication skills; experienced and effective in interacting with senior executives and line management at all levels. Credible, persuasive and clear in both oral and written presentations.

Effective interpersonal skills; must be able to relate to and work cross-functionally with a wide variety of professionals across different cultures. A certain level of travel will be required to GT’s locations domestically and in Asia.

 

Full Disclosure I am long GTAT and I have joined PTT Research.  My premium Forensics Newsletter is scheduled to launch on June 2nd.  The premium paid service option will grant my paid subscribers exclusive content weeks before my analysis is published on Seeking Alpha, the Obscure Analyst blog or any other website.  Another advantage of PTT is the subscriber Forum that allows sharing of ideas and analyst Q&A.  Did you know, that subscription based investment newsletter are typically tax-deductible?

 

 

 

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GT is likely showcasing it’s Spark Plasma Sintering (SPS) technology in Orlando based on the “#sintering” in the company’s tweet.  Here is some information on GT’s SPS technology that was acquired through GT’s acquisition of Thermal Technologies as well as the targeted industries this technology can impact.

 

Thermal Technology Acquisition

GT made it clear almost two years ago that they were interested in getting into thermo electric converters for hybrid electric vehicles.  This interest was highlighted the press release when GT acquired Thermal Technology.

The company has also acquired Spark Plasma Sintering (SPS) technology, which allows dense ceramics to be obtained under uniform heating at relatively low temperatures and in short processing times. The SPS technology is expected to have a wide range of applications including with medical applications, sputtering targets, space applications and thermoelectric converters for hybrid electric cars.

One important item to highlight is Spark Plasma Sintering (SPS) technology, this wild machine turns ceramic powder into a dense crystalline material in less than 5 minutes versus other machines that take hours.   GT envisions using this technology to and their ceramic patent  (acquired through GT’s purchase of Twin Creek’s Technology) to create a thin semiconductor lamina adhered to a ceramic body.  The ceramic bodies would be formed using GT’s SPS technology.  The patent states that devices can be formed in the lamina, including photovoltaic devices. The ceramic body and lamina can withstand high processing temperatures. In some embodiments, the ceramic body may be conductive.  This ceramic patent also involves Hyperion to produce thin semiconductor lamina.

THE SPS PROCESS

Unique to SPS is the DC current generating heat internally, as opposed to conventional methods of materials densification such as hot pressing, wherein the heat is external to the sample. While other traditional methods of materials processing require hours to reach peak temperature, Thermal Technology’s SPS takes only minutes. The clear benefits of SPS are the significant savings of time and energy and the ability to retain nano-structures.

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Full Disclosure I am long GTAT and I have joined PTT Research.  My premium Forensics Newsletter is scheduled to launch on June 2nd.  The premium paid service option will grant my paid subscribers exclusive content weeks before my analysis is published on Seeking Alpha, the Obscure Analyst blog or any other website.  Another advantage of PTT is the subscriber Forum that allows sharing of ideas and analyst Q&A.

 

by Matt Margolis

 

The release date of Apple’s next generation iPhone 6 is a mystery and each analyst and blogger has their own opinion of when it’s coming out.  I found one interesting rumor related to the iPhone 6 launch date that goes back to February 2013.   I found it interesting that the iPhone rumors began over a year before the product is set to arrive.  It also seems apparent that Apple’s 5s/5c launch were just table setters for what is likely to be a blowout product.  Apple appears set to launch a 4.7″ along side a 5.5″ iPhone 6 sometime between June 2014 and September 2014 and right now I’m leaning towards the earlier of the two dates.

The oldest iPhone 6 release date rumor I could find was based on a research report issued to clients by Jefferies analyst, Peter Misek in February 2013.  According to Appleinsider, analyst Misek believes Apple made an unsuccessful attempt to bump up the iPhone 6 launch into the back half of 2013 amid increased competition.

We believe a summer CY14 launch was originally planned, but Apple tried to accelerate it to stem its market share losses. The earliest Apple could have launched a 4.8” phone would have been this fall (with a target of Oct); however, our checks indicate that Apple’s suppliers are running into difficulties trying to scale the screen size from 4” to 4.8”.

Misek said scaling the in-cell screens from 4″ to 4.8″ has resulted in poor yields — meaning a significant number of display components from each batch being manufactured are not passing the company’s quality assurance tests. As such, Apple is unlikely to be able to manufacture enough of the larger 4.8″ displays to facilitate a full-blown launch of the handset until next spring.

In October 2013, Cantor Fitzgerald analyst Brian White indicated that a new big screen iPhone would arrive in 2014 as early as Q2 2014.

“Our meeting with a tech supply chain vendor highlighted a bigger iPhone is in the works, and our contact expects a launch in the 2Q:14/3Q:14 time frame,” White said in an investors note released on Thursday. “Nearly a year ago, our research in Asia uncovered early stage work on a larger iPhone, and we indicated in our Apple initiation report dated 9/4/13 that ‘a larger screen size on the iPhone is possible in 2014 that could approach 5 inches.’ Given today’s meeting, we are confident that a larger iPhone (approximately five inches) will become a reality in 2014.”

In November 2013, Susquehanna International Group Analyst Chris Caso shared the same opinion as Misek, specifically that the iPhone 6 would arrive in June, some three months ahead of the 5s/5c launch.  Caso also indicated that Apple might increase the price due to the bigger screen display that will be packed in the iPhone 6.

Caso also predicted that iPhone 6 may be more expensive than the current iPhone 5S. The company may start increasing the prices of its devices next year instead of lowering it as it will put new technologies to be further ahead in the market. The analyst said the increase in price is due to the bigger screen display that will be packed in the iPhone 6. Thus, iPhone 6 price may start from more than $199.

Rumors claimed aside from a larger screen, iPhone 6 will have a sturdier display with the aid of Sapphire glass, which was used to cover iPhone 5S’ TouchID fingerprint sensor. The Sapphire glass is claimed to be twice stronger than Gorilla glass by Corning used in most Android smartphones. Also, iPhone 6 may come with wireless charging feature just like the Google Nexus 5 but with the use of solar panels.

In February 2014, International Business Times (IBT) cited analyst Sun Changxu, who felt a June launch of the iPhone 6 along with a WWDC announcement seemed likely.

Chinese Web site QQ Tech reported an analysis from analyst Sun Changxu. According to the report, the analyst predicts Apple’s production to start soon as May. It is likely that Apple will introduce iPhone 6 during the WWDC.

Recent reports claimed Apple may release the iPhone 6 around June 20.  Reported features include sapphire screen, new mobile payment and a possibility of solar charging

The report also noted features such as a 4.7-inch screen and 1136 x 640 pixel display. Part of the prediction is a 5.7-inch phablet to follow the smartphone.

iPhone 6 June Launch date Fact Check Followup

  • Analyst Chris Caso indicated in November 2013 that Apple would not only release the iPhone 6 in June but also raise the price of the phone.  Followup: In April analyst Peter Misek reported that Apple has been working with carriers to charge and additional $100 for the iPhone 6.
  • Analyst Sun Changxu back in February indicated that Apple’s iPhone 6 production would start as soon as May and would likely introduce the iPhone 6 during the WWDC.  Followup: Various component makers have ramped up production beginning in Q2.  Additionally, iPhone 6 manufacturer Pegatron embarked on hiring spree in March and is expected to ramp up production of the iPhone 6 in Q2.
  • Nearly 3 weeks ago I reviewed Apple’s supply chain management and I noted that all of the activity occurring within Apple’s iPhone 6 supply chain are 3 months ahead of last year’s pace.   The accelerated supply chain activity included; significant price reductions of Apple’s current flagship phone (5s) occurring in March 2014 versus June 2013, component makers ramping production in April/May 2014 versus July/Aug 2013, leaked images of the iPhone 6 are surfacing months earlier  and one of Apple’s iPhone 6 manufacturing partners began hiring months earlier in the year compared to the hiring activity that occurred in 2013 just months before the iPhone 5s/5c launched in September.

Analysts have been forecasting the iPhone 6 to arrive in June for quite some time.  The flurry of recent news and leaks i.e.  (production activities, price cuts, manufacturing activity, leaked images, Apple/Carrier price increase discussions and Apple trade-in program) all are signalling an imminent arrival of the iPhone 6.  Apple’s 2014 WWDC  is just 3 weeks away and it might just be the perfect stage for Tim Cook and company to shock most, but not all of the analysts with an iPhone 6 product launch announcement.

 

Full Disclosure: I am long GTAT, Apple’s newest sapphire supplier

 

 

by Matt Margolis

GT ended Q1 2014 with a backlog of $609 million, consisting of 300 million of ASF orders, 296 million of Polysilicon and 13 million related to PV equipment. GT booked $29 million of equipment orders during the quarter, including 15 million in PV and 14 million in Sapphire that are have now been reported as part of the $609 million backlog. In addition, GT expects that the $58 million order for high temperature specialty furnaces will be reflected in Q2 reported backlog.

GT defines its order backlog as “amounts due under written contractual commitments and signed purchase orders for PV, Polysilicon and sapphire equipment not yet shipped to customers”. Essentially, GT’s back order represents open Purchase Orders (PO’s) for GT’s equipment that have not been shipped to customers.

Once items orders have been fulfilled from backlog they are shipped to the customers. However, if the equipment has been shipped to the customer and GT’s service staff has not completed the final assembly, integration and testing, the revenue from this shipment would be reported in “deferred revenue”. If GT has fulfilled sapphire materials and completed shipment but the product has not been “taken” for use by the customer it would also be reported as deferred revenue. Under the terms of the sapphire materials contract with Apple GT was expected to ship the goods to a defined facility for just-in-time production by Apple and GT bears the cost of storage. GT’s 10-K defines sapphire materials deferred revenue as, “short-term contracts or sales orders for sapphire materials”.

Once GT completes the servicing of equipment at a customer location GT will move the “deferred revenue” into recognized revenue during the related period. Sapphire materials once they are taken possession by the customer out of storage GT will move the “deferred revenue” into recognized revenue for the related period.

GT reported deferred revenue totaling $175.6 million in the quarter ending March 29, 2014 representing an increase over the last 6 months of $113.4 million. The amount of GT’s deferred revenue should be watched closely, as this represents the amount of goods that have been completed; either assembled and shipped equipment to customer locations or sapphire materials that have been grown, processed an d shipped to a defined storage location by the sapphire customer. Once GT completes the servicing of equipment at a customer location and the customer takes “final delivery” of the equipment GT will move the “deferred revenue” into recognized revenue during the related period. Sapphire materials revenue recognition is very similar, once GT’s customer takes “final delivery” out of storage GT will move the “deferred revenue” into recognized revenue for the related period. The release of Apple’s upcoming products that will feature sapphire are not known, however GT will be ramping up production and accumulating a significant amount of deferred revenue, which will only be recognized once Apple has taken “final delivery” of the goods. GT’s CEO mentioned during the conference call that the sapphire produced from Mesa will be fully utilized.

The annual revenue generated from Apple cannot be deduced by simply doubling the 2014 sapphire segment revenue but instead by examining the sapphire production capacity that will be produced from the Mesa, AZ facility. I am in the process of completing my production capacity analysis and my preliminary results indicate that GT can generate between $1.9B and $3.6B of annual sapphire revenue from the Mesa, AZ sapphire plant to Apple. This revenue range is based on a ASP (average selling price) of between $8 and $10 per 5” sapphire screen, 1,600 to 1,950 furnaces fully ramped furnaces, sapphire boules between 200 and 230 kg in size, days to grow a sapphire boule of 17 to 22 and an estimated loss from kerfing and grinding of 20%.

Full Disclosure: I am long GTAT

by Matt Margolis

GT Advanced Technologies reported Q1 2014 earnings after the closing bell today.  GT reported revenue of $22.5 million and EPS of loss of $0.22, in line with the company’s forecast. GT’s overall revenue forecast of $600-800m as well as the mix of revenue that will be coming from the “sapphire segment” has remained unchanged since the company’s last quarterly update.  GT’s Q1 2014 conference call is scheduled for 8AM ET tomorrow and I expect GT’s management will provide additional information related to 2014 as well as 2015 and beyond.

GT’s Q4 2013 Guidance

During the first quarter of 2014, the company expects to generate revenues in the range of $20 million to $30 million with a non-GAAP loss per share of $0.20 to $0.25.

On an annualized basis, during 2014, the company expects revenues to range from $600 million to $800 million, with approximately 15% of total revenues occurring in the first half of the year. The company expects that its sapphire segment will account for more than 80% of total revenue in 2014. The sapphire segment includes the company’s equipment and materials businesses in the LED, industrial and consumer electronics markets.

The Arizona (Apple) sapphire project has advanced from the “build out” stage in Q4 2013 to the “ramp up” stage as of the end of Q1 2014.  GT’s “ramp up” stage refers to the company’s focus of increasing its sapphire production capacity ahead of an expected demand in product from Apple.   Lastly, GT’s investments in new technologies are still expected to drive growth in 2015 and beyond, which is consistent with its guidance issued after reporting Q4 2013 results.

 

GT Management Comment’s on Arizona (Apple)- Q1 2014

We continue to expect that 2014 will be a transformational and significant year for GT as our sapphire materials business ramps up and we continue to execute on our strategy of investing in new technologies that will help drive growth in 2015 and beyond.

With respect to our Arizona project, we have now received three of the four prepayments from Apple.  We continue to expect our sapphire segment to contribute meaningfully to revenue this year.

During the first quarter the company received its second prepayment from Apple in the amount of $111 million. Shortly after the end of the first quarter, the company received its third prepayment from Apple in the amount of $103 million, which is not reflected in the first quarter’s ending balance sheet. Inclusive of the third prepayment, the company has received approximately $440 million out of the $578 million total prepayments that it is eligible to receive under the agreement with Apple. The company expects that the total prepayments it receives from Apple will fully fund its capital outlays related to the project in Arizona.

GT Management Comment’s on Arizona (Apple)– Q4 2013

The company expects that 2014 will be a transformational year, one in which it builds a sapphire materials business while continuing to invest in the new technologies that will drive its equipment business in 2015 and beyond.

Our arrangement to supply sapphire materials to Apple is progressing well and we started to build out the facility in Arizona and staff the operation during the quarter.

While our primary focus during the balance of the year is to continue to execute on our commitments in Arizona, our aim is to position GT not only as an exceptional sapphire supplier to Apple but also as an unparalleled world-class supplier of sapphire material and equipment to a variety of customers.

 

GT’s Deferred Revenue Balloons to $176m in Q1 2014

GT’s headline financial results (revenue and EPS) met management’s expectations, which was expected.  There is some significant activity that was reported on GTAT’s Investor Financial Summary.  GT’s deferred revenue has risen from $62m at the end of Q3 2013 to $176mm as of the end of Q4, GT has added $113m to deferred revenue over the past 6 months.  GT’s deferred revenue is at the highest level since Q1 2012.  According to GT’s annual report the company defines deferred revenue as, “amounts of equipment that has been shipped to customers but not yet recognized as revenue and short-term contracts or sales orders for sapphire materials”.   The takeaway here is GT has either “recently shipped” equipment to customers and not yet recognized revenue or this amount represents sales orders from Apple for sapphire materials.

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GT’s Capital Expenditures related to Apple estimated at $439.5m

GT continued to the ramp up of capital expenditures that begin in Q4 2013, primarily related to the Arizona (Apple) sapphire project.  GT’s Q1 2014 capital expenditures totaled $152.3, which brings the total capital expenditures over the last 2 quarters to $188.5m.   GT indicated that they had deployed $180m of PPE in Q4 2013, mostly in Arizona.  GT also re-directed it’s sapphire equipment inventory and supply chain capacity in Q4 2013, the approximate value of the sapphire equipment that was deployed to Arizona totaled $71m.   I’m currently estimating that GT has accounted for $439.5m or 76% of Apple’s $578m prepayment that was designated for capital expenditures to build out the Mesa sapphire plant (see image below).  Assuming the average ASF furnace cost ranges from $225,000 to $275,000 per unit GT would be able to procure/deploy between 1,600 and 1,950 furnaces through March 29, 2014 for the Mesa, AZ project.

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Conclusion

GT’s reported revenue and EPS results aligned well with management’s previous guidance.  The Q1 2014 earnings press release indicates that GT is still anticipating that its “sapphire segment” will carry revenue in 2014.  Additionally, GT does not appear to be backing down on its investment in Research and Development or the company’s expectation that new technologies will drive growth in 2015 and beyond.  GT’s sapphire project is on-track and has progressed from the “build out” stage to the “ramp up” stage.  According to my analysis, GT has deployed/spent approximately 76% or $439.5m of Apple’s $578m prepayment amount that was designated for capital expenditures to build out the Mesa, AZ sapphire plant.   Lastly, I’ve estimated that GT has acquired/deployed approximately 1,600 to 1,950 furnaces inside Mesa, AZ through March 29th, 2014.

The key takeaway is that there is an elephant in the room, that no one can specifically talk about or provide clear guidance related to the timing of a specific new device.  If GT provided clear guidance it may hurt certain device sales related to one of GT’s key partners.  The elephant in the room will ultimately decide how significant GT’s 2014 revenue will be as well as the revenue distribution between quarters.

 

Full Disclosure: I am long GTAT

 

GTAT reports Q1 Results

Posted: May 7, 2014 by mattmargolis24 in GTAT Investor Information, Uncategorized
Tags:

GT confirms guidance $600-800m for 2014. Reports 22 cent loss per share on $22.5m of revenue, which is largely in line with management’s guidance. Conference call scheduled for 8 AM tomorrow morning.

Revenue for the first quarter was $22.5 million including $13.2 million in photovoltaic (PV), $5.6 million for the sapphire segment and $3.7 million for the polysilicon segment. This compares to $32.6 million of revenue in the fourth quarter of calendar 2013 and $57.8 million of revenue in the first quarter of fiscal year 2013.

Non-GAAP gross profit for the first quarter was $1.9 million, or 8.5 percent of revenue, compared to $6.8 million, or 21.0 percent of revenue in the fourth quarter of calendar 2013 and $14.3 million, or 24.7 percent of revenue for the first quarter of calendar 2013.

During the first quarter, PV and polysilicon non-GAAP gross margins were 37% and 57%, respectively, largely in line with historical ranges. The sapphire segment had a negative gross margin during the first quarter, which reflected the impact of minimal ASF(R) revenues and the ongoing build-out of the company’s sapphire materials operation in Arizona.

During the quarter, the company incurred non-GAAP operating expenses of $43.4 million, consisting of $23.5 million in R&D and $19.9 million in SG&A.

Non-GAAP loss per share was $0.22 in the first quarter, which was in line with guidance. This compares to a non-GAAP loss per share of $0.22 in the fourth quarter of 2013 and non-GAAP loss per share of $0.07 in the first quarter of calendar 2013.

Management Commentary

“Our results for the March quarter were in line with our expectations,” said Tom Gutierrez, president and chief executive officer. “We continue to expect that 2014 will be a transformational and significant year for GT as our sapphire materials business ramps up and we continue to execute on our strategy of investing in new technologies that will help drive growth in 2015 and beyond.

“With respect to our Arizona project, we have now received three of the four prepayments from Apple,” Gutierrez continued. “We continue to expect our sapphire segment to contribute meaningfully to revenue this year.

“In addition, the favorable dynamics in our served markets continue to drive renewed customer interest in our ASF(TM), Polysilicon, HiCz(TM), and DSS(TM) solutions. Beyond these product lines, we continue to make significant progress with new game-changing technologies such as our Merlin(TM) solar module metallization and interconnect solution, our Hyperion(TM) ion implanter and the recently announced initiatives to develop coating and bonding solutions.”

Cash, Backlog and Orders

The company ended the quarter with $509 million of cash, cash equivalents and restricted cash, compared to $593 million in December.

During the first quarter the company received its second prepayment from Apple in the amount of $111 million. Shortly after the end of the first quarter, the company received its third prepayment from Apple in the amount of $103 million, which is not reflected in the first quarter’s ending balance sheet. Inclusive of the third prepayment, the company has received approximately $440 million out of the $578 million total prepayments that it is eligible to receive under the agreement with Apple. The company expects that the total prepayments it receives from Apple will fully fund its capital outlays related to the project in Arizona.

Equipment orders booked during the quarter were $29 million, including $15 million in PV and $14 million in Sapphire. The company ended the quarter with $609 million of equipment backlog, consisting of $300 million of ASF(TM) orders, $296 million of polysilicon orders and $13 million related to PV equipment. Subsequent to the close of the quarter, the company booked a $58 million order for high temperature specialty furnaces, which will be reflected in the Q2 reported backlog.

Business Outlook

GT reiterates the following guidance for fiscal year 2014, which ends December 31, 2014:

— Revenue in the range of $600 to $800 million,

— Non-GAAP gross margin in the range of 25% to 27%, and

— Fully diluted Non-GAAP earnings per share in the range of $.02 to $.18
Conference Call, Webcast

On Thursday, May 8, 2014, at 8:00am ET, the company will host a live conference call with Tom Gutierrez, president and chief executive officer, and Raja Bal, chief financial officer, to discuss its first quarter fiscal year 2014 results, general business update and outlook.