22 November 2021
AmpliTech acquiring Spectrum Semiconductor Materials
AmpliTech Group Inc of Bohemia, NY, USA - which designs and makes signal-processing radio frequency (RF) components for satellite communications, telecoms (5G & IoT), space, defense and quantum computing markets - has agreed to acquire the assets and operations of Spectrum Semiconductor Materials Inc of San Jose, CA, a global distributor of components (packages and lids) for integrated circuit (IC) assembly in prototyping, testing and production. The transaction is expected to close within fiscal-year 2021, subject to the satisfaction of certain closing conditions.
The acquisition is expected to deliver significant strategic and top- and bottom-line benefits while also building on AmpliTech’s technical and management expertise and distribution reach. Spectrum’s unaudited 2021 revenue is on track for double-digit year-on-year growth to $10-11m, with pre-tax net income of about 25% of revenue. Spectrum achieves strong net margins by stocking a wide variety of specialty products and employing digital inventory practices that optimize operating efficiency. AmpliTech’s revenue for the past four quarters was $3.5m, and order backlog recently reached a record $3.4m following $1.2m in new orders. Spectrum currently has record backlog of $8m in orders expected to ship through end-June 2022.
The purchase price is $8m in cash plus $1.5m to be held in escrow through December 2022 (to fund any adjustments) plus the grant of 188,442 restricted shares of AmpliTech common stock. The parties have agreed to a purchase price adjustment of 25% of Spectrum’s cumulative net revenue above or below $20m in sales for calendar years 2021 and 2022 combined. On 30 September, AmpliTech had about $28m in cash, cash equivalents and marketable securities, and no long-term debt.
Of strategic importance, Spectrum provides a distribution platform in the USA, Europe and Asia for AmpliTech’s new line of monolithic microwave integrated circuit (MMIC) chip designs, and Spectrum has been building its RF-focused semiconductor revenue base. AmpliTech’s MMIC chip designs integrate its low-noise signal amplification (LNA), signal filter and signal attenuator technologies into the much smaller and more flexible chip form factor. Foundry production of initial MMIC chipsets is targeted for commercial availability by the end of first-quarter 2022.
It is reckoned that each company brings proven sales personnel and relationships that complement each other in addressing the combined firm’s expanded market opportunity. Furthermore, as AmpliTech develops its new MMIC line, Spectrum can package the designs for high-volume applications expected to drive sales growth. The acquisition is expected to bring AmpliTech a substantial business development presence in Silicon Valley and international markets, building on its existing East Coast and Texas teams to create a broad global footprint.
“Spectrum Semiconductors is a perfect fit for advancing AmpliTech’s strategic goals and delivering shareholder value. With Spectrum, we will add a well-managed, growing business with a long-term track record for high quality and excellent customer service and the ideal distribution platform for the launch of our MMIC chip solutions,” says AmpliTech’s CEO Fawad Maqbool. “This transaction will allow us to more than triple our current annual revenue run rate, while also being immediately accretive to our bottom line,” he adds.
“Of equal importance, Spectrum brings us a highly satisfied, long-term and global customer base with excellent penetration in our core end markets of aerospace, defense, automotive and computing, along with a deep Silicon Valley presence, to support the launch of MMIC chip solutions [that] we plan to bring to market by the end of first-quarter 2022,” Maqbool continues. “We expect AmpliTech and Spectrum will play a key role in improving the speed and efficiency of communications systems around the world in high-growth applications such as 5G cellular, MEO and LEO satellites, quantum computing and autonomous vehicles. Importantly, AmpliTech is well funded to complete this transaction and to then execute on the growth opportunities of the combined business,” he concludes.
Joining forces with AmpliTech “provides us with a broader base of opportunity and exciting growth potential as we collaborate to bring AmpliTech’s premier MMIC chip solutions to market, comments Spectrum’s CEO Robert Larson.