Q2 2020 Earnings Call
Ladies and gentlemen pay somebody the caucus will begin momentarily we thank you for your patience and <unk>.
[music].
Greetings and welcome to the books automation Q2, 2020 financial results.
During the presentation, all participants will be not listen only mode. After which we'll conduct a question answer session at that time, usually have a question. Please press. The one followed by the floor and no telephone if at any time getting the conference you need to reach an operator, Please press star zero.
During this conference is being recorded Thursday April Thirtyth 2020, I would now like to turned to caucus over to Mark Namaroff. Please go ahead.
Thank you Melissa and good afternoon, everyone on the wind today.
Every one of staying healthy in this environment.
We'd like to walk in mutual earnings conference call for the second quarter fiscal 2020.
Q2 earnings press release was issued after the close of the market today and it is available on our Investor Relations website, located at Brooks Dot Investor room Dot com.
Or the supplementary Powerpoint slides that we'll be using during the prepared remarks.
I would like to remind everyone that during the course of the call today, we'll be making a number of forward looking statements within the meaning of the type of litigation debt Securities Act of 1990 fives.
There are many factors that may cause actual financial results or other events could differ from those identified in such forward looking statements I.
I would refer you to the section of our earnings release titled Safe Harbor statement, the Safe Harbor slide our affirmation Powerpoint presentation on our website.
And our various filings with the FCC.
Including our annual reports on form 10-K on a quarterly reports on form 10-Q.
We make no obligation to update these statements should future financial data or events occurred that differ from the forward looking statements presented today.
We would also refer to a number of non-GAAP financial measures, which are used in addition to Atlanta conjunction with results presented in accordance with gap.
We believe non-GAAP measures provide additional way appealing aspects of our operations and performance well when considered with GAAP financial results. A reconciliation of GAAP measure and reconciliation to GAAP measures. They provide an even more complete understanding of the Brooks business.
Non-GAAP measures should not be relied upon to the exclusion of GAAP measures themselves.
So on the call with me today is our President and Chief Executive Officer, Steve Schwartz, and Executive Vice President and Chief Financial Officer, London Robertson.
Well open the call up with remarks from Steve on the highlights of the second quarter and then Linda will provide a more detailed look into our financial results for the quarter and our outlook for the third fiscal quarter up 2020.
Well that have time to take your questions at the end of the prepared remarks.
And with that now I'd like to turn the call over to our CEO Steve Schwartz.
Thank you Mark and good afternoon, everyone. We're glad to have you with us today.
As we've already published preliminary results in a press release, we issued on April 13, I'll recap those results briefly and focus my remarks on some extra color at the segment level to give you some indication about how we see the current and near term business environment.
I'd like to start by discussing our priorities during this pandemic.
First is the safety and well being of our employees and their families as well as our partners, including our suppliers and customers.
Second our ability to serve our customers that are deemed essential businesses with specific focus on any and all urgent covert 19 request and never been many.
And finally, the ongoing health of the company for the long term and actions, we're taking to ensure that we emerged from this crisis stronger than ever.
Well the exceptions of only a few brief work interruptions all of our 20, plus factories laboratories and repair centers were up and running throughout Q2 and all are currently operating.
Of our approximately 3300 global employees about 1800 have jobs that require them to be on site.
Most of our employees are working from home.
We are particularly proud of the way that each and every employee has embraced the new work practices that includes social distancing.
The diligent use of pp.
Temperature screening staggered shifts and other practices, which have allowed us to continue serving customers.
All have adapted to this new work environment, and we could not be more pleased with the resiliency of our operations. During these turbulent times.
We consistently met our delivery commitments to customers as they struggled with their supply chains.
And in many instances on the life Sciences side, we stepped up to provide gene with sample management and informatics services to customers, who had either lost their regular services providers or who needed new services from us that came about because of the cobot 19 crisis.
It's been energizing to bring even more capability to our customers and their need for our services underscores our purpose and mission.
Finally, we're building this company for the long term and our quarter to quarter in year to year revenue and earnings growth speaks to the momentum that we've generated.
We've amassed an incredible technology and scientific portfolio.
Global presence that allows us to deliver our world class capability to customers around the world.
And we possess market positions and trusted brands. The the that are the envy of our competitors.
We've accomplished this through the energy and commitment of our global workforce.
No just how to ensure that we deliver on our long term goals.
There's so much opportunity in front of us and it would be short sighted of us to slow down now.
Especially since the capability, we're building will be even more valuable than the future.
For that reason, we intend to retain our team and fund our activities for technology development, New discovery market capture and customer support.
With each day that goes by we're taking actions and making investments to emerge from the pandemic even stronger.
And more necessary to our customers.
Our decision to continue these investments will have some impact on our earnings performance through the rest of this year, but we believe that it's absolutely the right action to take.
As companies in countries are contemplating how to re emerge from the pandemic, we have a definitive plan in place and a dedicated team that will continue to drive the momentum that we've established.
Now I'll report on Q2.
Second quarter performance was strong with revenue of $220 million up 11% year over year with the same 11% growth for each of our semiconductor and life Sciences segments.
Which delivered strong results with $95 million in revenue, 4% sequentially with growth coming from both gene was and sample management.
As each of these sub segments witnessed its own dynamics I'll cover them separately, starting with Jean was.
Once again gene was outperformed even our expectations delivering a 25 per cent year over year increase in revenue to $41 million.
We were advantage by our unique capabilities as both readers and writers of genes, which allowed us to overcome some of the curve ball thrown our way.
First in early February when we announced or Q1 result, we told you that except for a team of scientists who remained on site in support of urgent covert 19 research or Sue Joe China operations were basically shut down.
It's in our Sue Joe side, where we perform the vast majority of our genes synthesis. Although we are bracing for what could have been a prolonged slowdown China operations came back much faster than we'd imagined.
The end of February more than 90 per cent of our employees were back at work.
And even without a recovery in academia in China demand from global customers with strong.
In fact, despite the speed bump in February the March quarter was a record for synthesis at just over $10 million.
Similarly in next generation sequencing, we also had a record quarter with year over year growth a 46%.
And consistent seven per cent sequential growth, but with more volatility as the quarter progressed.
We saw a normal pattern for N.G.S. demand and the first two months of the quarter and then something of a spike in orders in the first half of March followed by two weeks of lower order volume.
As we assess the N.G.S.N. synthesis businesses, we believe that much of the queue to increase was the result of our normal customer capture.
At the same time it appears that some of the March 1st came from researchers who no longer had capacity from their core laboratories or facing reduce productivity from their existing suppliers.
Well gene was remained at full capability and was eager to serve.
That said order patterns for April have been steady, but slightly lower in both synthesis and N.G.S.
Well, we have mixed signals as customer engagements for both synthesis N.N.G.S. projects remains quite active.
In say or sequencing, which is a high volume overnight turns business, where we perform millions of measurements for thousands of customers each quarter.
Revenue was steady for the first 10 weeks of the quarter.
When shelter in place or disclose many academic labs and caused the shutdown of non essential research. We saw an abrupt reduction of more than 50 per cent of our average daily volumes for the last two weeks of the quarter.
And that level that has persisted through out most of April.
And though total sanger revenue actually decreased slightly quarter over a quarter. It was still up low single digits from Q2, one year ago.
In two three we anticipate lower Sanger revenue until academic labs come back on line and industry Reaccelerates.
And although we've seen average daily volumes increase during each of the past four weeks, we still remain below 50 per cent of average so at this point in the quarter. It would be too early to say that we have any concrete signs of a meaningful returned to work.
In terms of overall gene was outlook, we expect business to be slightly down until academic researchers returned to their benches and the activities that support clinical trials are back on the upswing.
We don't have a prediction for when that will be what we model a gradual were turned toward more normal volumes as we make our way through the rest of this quarter.
Difficult environment like the one we're in provides opportunities for companies that are prepared.
And q. to customers challenged us with hundreds of covert 19 projects that gave us opportunities to demonstrate are incredible scientific <unk>.
On the clock collaboration and fast turn high quality results in support of their essential research.
In addition, we took on many new urgent projects for first time customers.
We believe that over the long run it's this attention to solving customer issues that segments them to us and enable gene was to add more than 200, new customers in the quarter.
Yeah.
That will turn to sample management, which even with all the disruption <unk> from Corona virus came in right on forecast.
I remind you that this year and sample management, we have two areas of focus a return to double digit revenue growth.
And sustainable gross margin improvement.
And we're pleased with our progress against these goals.
Even in this environment you two was a very solid quarter.
Revenue came in a $54 million up 5% from Q1.
And three per cent year over year.
Moreover, gross margin was up another 290 basis points from Q1.
We're very encouraged by these results and it gives us confidence that this business of solidly on a path to be able to deliver on our expectations.
At the time, we announce Q1 results we knew to things that the changes we had made to the organizations structure and our focus on performance or set to deliver more growth and keep us on a trajectory for re accelerators shun of revenue in Twentytwenty.
And that we were on track to deliver more profitability improvements.
That said, we also mentioned to you that we could foresee approximately $2 million a potential headwind from the Corona virus, because the inability of our field teams to complete system start ups and perform revenue generating service on our equipment.
Unfortunately, our customers, obviously did not open for our employees and we did incur the headwind that we had built into our forecast.
That said there were many accomplishments in the quarter and I do want to highlight a few as they relate to trends in the business.
Are cryogenics cold chain products continued to make strong progress revenue top $3 million in the quarter and we shipped be three c. cryo systems to nine different customers six of those were repeat buyers.
To date, three fourths of our systems have been sold into selling gene therapy applications and the momentum for these automated solutions continues to build.
In spite of the significant slow down a clinical trial activity in March two two biostorage activity generated our largest sample intake quarter since 2017.
And we're encouraged by the reinvigoration of our customer capture activities.
And then our consumer within instruments business lines, we made fast turn capital additions to respond to increase volume of consumable that will be used for cobot 19 test.
As part of packages that we sell to diagnostics companies.
This added capacity should allow us to increase revenue in Q3.
All in it was a very good quarter for sample management, even with some covert 19 related delays revenue growth was right on track profitability was ahead of schedule and the result of our deliberate actions and something that will build upon.
The team has energized inactive when we plan to come out of the covert 19 days stronger than ever.
What energizes, even more as the amount and level of large customer large deal activity that's underway.
During these days of no travel our customer engagement activity has moved to the Internet and deals that we've been working on for months are still being advanced. We are currently negotiating the final t.'s and sees on two large contracts and we have more multi million dollar contracts in the pipeline.
Opportunity speak to our capabilities and confidence to resume growth and profitability in this business.
On the semiconductor side, our performance in Q2 demonstrates the value of our product portfolio.
As of our close working relationship with our supply chain, we experienced only a small covert 19 related revenue impact in the corridor, which caused to know impact to our customers.
At $125 million and cute too.
We established a new record high for quarterly semiconductor revenue and that's all the more remarkable because as an industry, we're still not back to our highest for semiconductor capital equipment spending.
We attribute this out performance to two factors.
The strong hi market share position of our contamination control solutions business, which satisfies are rapidly growing technology need.
And continue designed when and market share capture on our equipment automation products for O.U.M. process equipment, along with the steadily evolving advance packaging market.
I'll give some specific color from our major semiconductor business drivers to automation advanced packaging and contamination control solutions.
Automation products remain strong in the quarter with systems up approximately 10% and robot similar to last quarter's results.
Had record bookings for our vacuum robots and vacuum systems, indicating demands remains a very strong.
Sales to Chinese equipment manufacturers is picking up and this is a good indicator for both China fab activity and advance packaging capability.
We saw an uptick in advance packaging and the quarter to just over 13 million dollar or up 30% from Q1.
This is still lower than one year ago, but it's the first sequential up tick in the last three quarters and in general a positive indicator.
Based on order activity, we do have some indication that advanced packaging opportunities may be starting to percolate, especially in China.
Finally, I'll give a brief update on the contamination control business, which has been extremely strong as we deliver to record $45 million in revenue.
The 45 million number is extremely significant for several reasons.
First we truly tested our supply chain as determined it to be very capable.
In the first two quarters of 2020, we shift as much revenue was in the last three quarters of 2019, and those were already healthy business levels.
Second we method demands for the expansion of five Nana meter foundry ramp on schedule and with very high quality.
And finally, we continued to win additional business across a broad range of customers device technologies that will serve as well as to your one foundries spending subsides.
Revenue in C.C.S. will necessarily be lower in Q3. After two very strong back to back quarters, but still we expect healthy levels of more than $30 million in revenue, which will be largely made up of a broader base of customers across different geography and technology applications.
All in we're prepared for another strong quarter and our semiconductor business that said, we're also aware of some of covert 19 related supply chain issues that are slowing delivery of some parts.
So far we've been able to navigate through most of these issues that are remains to be seen what the impact might be on actual demand from our customers.
There's currently a lot of speculation as to the outlook for semiconductor processing equipment and Twentytwenty.
Already are March quarter semiconductor revenue was up 11% from one year ago and our two two semiconductor book to Bill was 1.2 for the quarter on a record revenue corridor.
Depending upon June quarter capability of the global supply chain are backlog and customer demand expectations would allow us to deliver yet another record quarter in June if we did not see any meaningful interruptions.
All in we had a very solid second quarter.
Adjusted well this changes hit us.
Handle companies.
No that will need to rely on the same adaptive skills into June quarter, which may be even more uncertain, but already we're well positioned and were extremely confidence in the long term opportunities that were diligently winning with all the we're investing today.
And that concludes my formal remarks, and I'll turn the call now over to London.
Thank you Steve.
I'd like to refer your attention to the slides on our website started English like three.
Shouldn't Steve hit on these messages in his remarks I will also be brief on what we see as the headlines of our performance.
We had excellent momentum that has only modestly slowed by coded 19 disruptions.
We have performed remarkably well with the double digit your rather than a year over year revenue growth in both segments and have established ourselves truly as a top reliable supplier and every market we serve.
Next we expanded earning substantially with continued performance enhancements in the life Science segment.
To put a finer point on a gross margins in a sample management business or up nearly 600 basis points from a year ago.
And third we are well equipped for what lies ahead or liquidity as strong with 198 million of net cash on the balance sheet and healthy cash generation.
To this point, our ear to date cash flow from operations. When you exclude the taxes paid on the sale at the semi cryo business or $51 million. This is a year to date improvement of 29 million over the prior year.
The businesses healthy and both sides are contributing gross profit and cash flow.
Let's move on the slide four to review the overall piano.
Let let me first point you to the gap earnings at highlight what is different in that comparison.
The growth of rubbing it in operating income is similar to that shown in the noncat profile on the right side, but what is different on the left side isn't the tax line.
The first fiscal quarter is guided under gap, we recognize the windfall tax benefit.
<unk> 6 million, which is related to long term incentive stuck units to vested in the first quarter.
That allowed that did that allowed deduction.
Ultimate in a net tax benefit of $3 million for the first fiscal quarter in the second quarter is back to normal with a 3 million tax expense the $6 million swing offsets the positive operating performance picture and they got profile.
In the non gap results, we apply this windfall to the projected tax rate and take it across the quarters. So the fiscal year. So that you can use the financials for a level performance indicator.
Continuing with the nine got performance on the right side you can see the performance supported 48% your to your growth in earnings per share.
Starting at the top revenue growth came similarly from each business with each growing 11% here to year.
We saw a nice up taking gross margins of 60 basis points sequentially.
Make enough to gross margins remained approximately level from Q1 as expected.
The object is driven by life Sciences improvement on a year over year basis. The dynamics are also similar with improvement in life Sciences, and a bit softer margins in semiconductor.
But all in gross margins continue to make progress and contribute to the bottom line.
Operating expenses during the quarter were up on a sequential basis. The increase was in the R. and D. for semiconductor business or engineering team has been kept busy throughout the cold, but 19 environment committed to advancing the projects with customers.
In a year over year basis operating expense was $7 million higher driven by both R. and D.N.S.G.N.A.
In the S.G.N.A. align the growth is driven primarily around investments in life sciences, including our <unk> I.T. transition to a single club based ear P. platform gene was growth and some additional structure from our recent acquisition of rural software.
Well, we are spending some extra to keep our team in a safe environment and I'm bored with us through the cold at crisis, we anticipate reductions and travel expenses in G.N.A., which will result in lower operating expense by approximately $1 million to $2 million in the third quarter.
You can see operating margin expansion.
Combining the growth with the margin expansion you can also see nine cabinet income group, 51% a year over year and expanded 11% sequentially.
Moving you below the operating income line.
Interest expense was 600000 lower by about $7 million compared with last year. When we were carrying debt associated with the gene was acquisition.
<unk> tax rate for the quarter came in about 23% very consistent with our expectation of 21% to 25% for the year.
Mr. Now over just like five to discuss the segment results starting with life Sciences.
In the second quarter.
Like Sciences revenue grew 11% to 95 million compared with the second quarter last year on an organic basis life Sciences grew 11% as well.
This quarter was the first full you're over your comparison, which includes a full quarter of gene was revenues since the acquisition or the business.
Member of 2018.
Gene was has had a strong second quarter, where the revenue a 41 million growing 25% from last year. Despite the influx of coping 19, Steve addressed.
As as a reminder, ER gene was China operations were largely closed down and and observed strict quarantine restrictions from that Chinese new year's through February 10th the exception to that or the latch from which gene was provided gene synthesis support for coping 19 research customers.
We estimated that to shut down had an impact of approximately $2 million in the quarter. We are currently fully operational and demand from the China market has largely return.
Sample management provided 3% organic growth during the quarter in line with our expectation when we started the corridor.
We had described and we did see about 2 million headwind from Kobe 19 in the large store systems and post warranty services.
This was due to some delays and onsite installation and general lack of access to customers sites.
But there were bright spots and sample management as well you're over your growth was driven by cryo, which more than doubled and more substantively Biostorage services grew 7%.
We had been very encouraged by the continued significant engagements and wins by the teams in the large stores business and and Biostorage. During this environment fueling the path to return to double digit growth.
Yeah.
In addition, during the second quarter, we acquired the life Science Informatic software from rural.
<unk> provides club they software solutions to manage laboratory work flow and biased sample data for a broad range of customers in the biotech healthcare pharmaceutical sectors.
<unk> contributed approximately half a million of revenue in a time that we loan them since mid February.
As we announced into March press release effective April 1st we reorganized her life Sciences business, we've combined that biased toward services with Jean was leveraging that common lab services and sample handling capabilities.
This business combined is now $64 million of this quarter's 95 million business and showed year to year growth on that basis, 17%.
Remaining portion of the segment of life Sciences is the life Sciences products, which was about 31 million and was up 1% here over here.
If we had avoided the negative impact of the Kobe 19 constraints, we estimate that like science products business would have grown about 4%.
Yeah.
Another bright spot in the quarter was on the gross margin line <unk>.
Segment improve nicely in the second quarter up to 45.8%.
Up 330 basis points compared with last year.
A year over year improvement was driven by the performance and sample management.
In fact, we an improvement on every area of the business, including our large twin banks store systems and services. The cryo systems, the consumer Wilson instruments and the bias towards services.
This is driven by the performance improvements cost reductions and they improve price management that's been implemented.
The growth of the segment.
And gross margin expansion covered the increased operating expense and drove 260 basis points of incremental operating margin year over year.
Leverage of this business model and growth mode is quite evident on this page.
As we look into the third quarter, we are more cautious due to the continued and buried impacts of Kobe 19.
Steve describe we've seen inside gene was sustained demand and synthesis some volatility in the next generation sequencing.
And the lower Runrate from singer sequence.
Most notable to US is that continued absence of the academic research institutions, and we obscene only a portion of the commercial teams return and false active status.
And then sample management is unclear when customer sites will fully open around the world limiting our access for installations and services.
So at this point.
We're expecting like sciences to deliver revenue in the range of 85 to 91 million, which is about 5% to 10% lower quarter to quarter.
It's turned over to slide six to review or semiconductor business.
Semiconductor solutions revenue was 125 million for the second quarter and increase of 5% sequentially and 11% a year over year.
If you were to look into the details of the quarter to quarter, you would see end up taking the systems business, which we ship primarily to cheer to Williams.
I would highlight the strength on that line is in the atmosphere systems as we expected.
We do expect to see more vacuum systems coming in the second half we should assist gross margin.
The real story in the revenue Lane, however is the string the contamination control solutions, which indeed ships to end user fives.
As reference these are record quarters for us and see see us and we continue to see expansion of qualifications and orders across many <unk> rest of the semiconductor stories and robots, while it is stable quarter to quarter is significantly higher year over year, and our <unk> customers continue to call for additional output.
We had into our second half.
It may appear we face no challenges in the second quarter, but in fact, the accomplishment reflects much villages to coordinate supply availability backed reproduction and of course customer needs.
We estimate the negative impact of Kobe 19 on revenue during the poor for semiconductor was approximately 5 million.
Supply chain in the services challenges.
On the positive side. These are delayed not lost opportunities and due to the coordination efforts our customers were not surprised nor disappointed by us.
Gross margins and semi were similar to the prior quarter at about 40% and operating margins improve by 70 basis points.
As mix improves in the second half, we expect gross margins district.
And if the market hold growth will vary operating margins backup word on the leverage of the model.
Similar to the life science business work cautious about the L. look for the third quarter, we expect our supply chain will continue to face. Some issues. We also are sensitive that the broader supply chain of our customers a site from us affects the end users timing for when they need our product.
Finally, we know the impact of Kobe 19 on the end markets can change rapidly.
We expect our semiconductor business deliver revenue in the range of 115 to 124 million.
This is approximately flat lower quarter or I'm sorry.
<unk> to down 8% quarter to quarter.
Let's turn now over to slide seven for a summary of our cash flow over the corner.
We generated 26 million of adjusted operating cash flow during the quarter. This excludes 92 million of income tax payments associated with the gain of the 2019 sale over semiconductor cryo business. We also used approximately 16 million of cash for the acquisition of rural as mentioned previously.
Our cat backs amounted to 12 million for the border driven primarily by investments in operations and that includes approximately 1 million for the new gene was operation facility and Sue Joe China.
Total uses of cash during the quarter totaled 105 million and the change in net cash and equivalence during the quarter bring start cash restricted cash and cash equivalents.
Dallas down to 249 million.
A highlight here is the cash capability of the business, we adult with Jean was in subsequent to the divestitures semi cryo business.
You're to date as I said before or operating cash flow. When you exclude the attacks on the gain on the sale was 51 million or an increase of 29 million year over year.
On slight ache, you will see a summary of the balance sheet.
Can see at the top of the March 31st column, we now carry 249 million in cash marketable securities.
51 million and we have 198 million of net cash for operations and investments as strong position provides us the fuel to invest for growth and gets us that competence, we will whether these uncertain times and customers in or employees that confidence that we will sustain or investments.
Starting out at summary on slight nine.
Fundamentals of the business or intact, and we've gained customers and market share. During these times, we have extended her leadership and continue preparing ourselves to be ready took celery <unk> recovery of the market.
The balance sheet, a strong provides us the fuel for the journey and the strategic flexibility.
We have seen growth momentum and each business in semiconductor we saw strong orders and have healthy backlog well. We also know the W.S.V. Catholics environment comes down to the path, which the chip makers decide to take.
And then this time in particular, the volume customers depend on abroad supply chain as vulnerable.
Our life Sciences business continues to when new business.
Active markets, a farmer biotech and clinical continue to engage on improving their infrastructure with our capabilities.
Into our into request or support for the coded research that they've stepped up to do themselves.
So Meanwhile, the academic research institutions have not returned to work yet and the timing of that return is uncertain and buried across the regions.
So we find ourselves with unusually mixed signals.
Good customer demand momentum, but uncertain market continuity in the near term.
We have solid backlog, but uncertain access to some customer locations.
But there is one aspect that is very clear to us.
We have the momentum with customers and the opportunity to delight them.
We keep that momentum with us.
We will maintain our resources and be ready for the ramp that's markets do fully return.
In the short term, we're carrying some cost.
We have some elements of our business less active during this time, but we're going to keep the team employee.
We are providing premium pay for on site labor, ensuring that P.P. and clean facilities make a safe environment.
An expedited shipments to satisfy stress delivery schedules.
We will carry some of this cost in the short term and we will win additional customers as we are there for them throughout.
And we will be prepared for the full recovery Ram pitch the market returns to working order.
Discover that guy items for the third fiscal quarter of 2020.
Revenues expected to be in the range of 200 to 215 million adjusted Eva does anticipated to be 26 to 34 million and non gap diluted earnings per share it to be 16 to 24 cents per share.
Gap will be in the range of four to 12 seconds.
For life Sciences, we factored in a return Oh, the markets and the June.
This now concludes our prepared remarks, and I'll return the call back over to <unk>. The operator take questions from the line.
Thank you.
Ladies and gentlemen, if he would like to register for a question. Please press the one.
<unk>.
Request.
The question has been sick and you would like to each while you're just <unk>.
One.
The question.
First one question need something else Patrick.
That's good okay.
Oh, Thank you very much air and hope, everyone as well and and congrats on a a really nice quartering needs a challenging circumstances <unk>, maybe first stop in terms of the disruptions into volatilities you've seen it can you give a little bit of color on your end. How you are able to manage you know a very fluid and.
<unk> and ensure that your top to your customers.
What date and here you know what were some of the steps. She took happy to business continuity plans work. If you could just give a little bit of Colorado <unk>.
Patrick and thanks for the question on this specifically on the semi side, Yeah, we do a lot of credit to the to the large oh, we m. customers. They give us a good look at the business and they adjusted.
They adjusted quite frequently so we're able to get out in front of the supply chain and then our team manage the supply base extremely well I think this is something over the past years, that's become really fluid when we get a signal from our.
Cheer when are we m.'s were able to transmit that quickly to our suppliers to get them prepared and I think the team manager did really well it wasn't without problems for sure, but everybody knew how to acceleration to get the job done and and Patrick inside the company everybody knows that the delivery for the customers a top priority. So if we if we go over.
Overtime, if we spend if we do something for to get shipments there we do it.
And so I think that's just a its success successful model that that played out through the Kobe period, and and I think the business continuity plans that we haven't place you know we kicked him into action and I think they played out extremely while I don't know that anybody could have anticipated the magnitude of what what.
Everybody was going to be faced with but I think that the team responded well we're functioning completely differently just even two weeks into the.
The shut down period, two weeks into the shut down period, we were operating.
The same fluidity, but it you know really different mode. So in general the things. They should have happened did and you know we we continue to manage going forward. The supply base. There are air pockets were finding that coming from India from Malaysia that we've been trying to work through now for the past five weeks I think we're doing.
Very well, but when you hear uncertainty from everybody in and around the slide you think we're all dealing with the same kinds of things, but I I do believe the team as in front of it than we seem to be weathering it pretty well.
Prank that's helpful. At maybe as my follow question to stay on the semi side maybe feet blended in terms of the margin pool flowers actually holding up very well given a lot of the the movie pieces that that our current <unk> you plan to send me side of things can you discuss your I guess in getting Tory managed.
<unk> <unk> <unk> your <unk> I change as well as your customers the whole building a little bit a buffer inventory uncertainty that's out there. How are you manage any entirely books and ensure your customer deliveries as well as keeping a little bit a buffer for yourself you have been the market uncertainties.
Yeah. It's a good question so on the inventory front.
I have to say the one thing that is.
Then the most satisfying to see and probably the biggest change is the fluid communications on all fronts. So as a communications on a daily basis with customers. As was was supply chain is happening and I think are the leader of our supply chain I would say is pretty and.
Tense on this so he he's operating multiple times owns you know so so this has been that this has been a key aspect is tying out what are the priorities.
And if we don't have particular parts were.
We're exercising those supply chain in most of them had been resolvable, we fed modest constraints were and we married that then with our Labor Force and our Labor force, we've been very we'd given our labor force latitude that if they have a concern or.
They have a specific high risk situation at home that they that they are not required to be here. However, in large part or forces been here. So we marry those things to the priorities are the customers now.
So your point, whereas the buffers, we have decided to put in a couple million.
Two to 5 million of investment in the third quarter as we go into third quarter into him and Tory in the supply chain to make sure that we're securing what we need not because.
Yeah, we do see we do see strong demand that would would suggest you we have to ramp but it's as much about making sure that we have what we need when we needed in this environment.
So we're exercising putting some buffers in ours I think in our customer front or seen respectable inventory levels were not seeing anybody slow down, but we're not seeing anybody but high demands just simple things and either so I think it's pretty balanced on the front.
Yeah and.
Did Patrick did you have another part of your question there that I missed I want to make sure. It coverage no no <unk> that was you you've asked for that very well I. Just want you asked me to click on the Internet about managing your own inventory levels, given the uncertain market twice. The so that's it for me. Thank you very much.
Thank you Patrick.
Next question or something.
Oh.
Okay.
Hey, Thanks for taking the question I guess the first question just be interested in on on your way just thoughts on the synergies between the the sample services businesses, whereas you know not that these businesses that are now being management.
Are you seeing more overlap schemes customer bases.
Quantify it's English customers and use your sample management services or vice versa.
Yeah, Hi, Jacobs, So let me give you a little bit of background here and then talk talk to you about the future. So historically, we've had a business it's related to this in the alliance we have with Rutgers University and this is something that that came when we they came with the Biostorage team when we did the acquisition.
And 2015.
And the the business called the bio storage alliance and and there there are a number of studies. The number of projects that are ongoing related often to a particular disease study and the the combination of the team at Rutgers in Indianapolis would prepare the Kid work with the collection get the samples in preparing.
The samples often do measurements on those particular samples give the days of the customer and then store.
The samples for long term storage. So it's a business model that we understand and what we have now is with the acquisition of gene with you can imagine for the for the with any acquisition.
There's a time and there's a speed with what you've all but integration gene was was on such a growth tear that intentionally we left them without.
Full integration and we allowed them to continue to get their roots. We did three large capital expansion still allow them to keep growing but all the time, we had an idea and then I toward the synergy say, we get between sample management than gene with which is which would be.
A much bigger version of the alliance in other words, a much broader sales force in an incredible increase the amount of laboratory and scientific capability that we would add to the global presents we have in the services business. So we've always had an eye to it and now with the with the focus putting this business units both of these busy.
This is under <unk> I think the team is has really accelerated their effort about how to go. After this business of identify it how to go work on customer capture and to get this brought into this.
To this business unit, so you'll see over the next quarter's yeah. It was not some we're gonna wait years for you'll see over the next quarter's that will start to win some contracts here and we will report them to you know because we we think there are tremendous synergies to be had the team's working on a number of them already and the speed with which they have engaged it it's a business that that.
No, particularly well and and we think it'll be.
Tremendously successful I will know one other change.
Amy Lee hours the person now responsible also for.
<unk> the the co founder C.E.O. of gene with Amy took one of the business unit heads inside of Jean with Dr. Sarah Eckenrode who've been with Jean was for about 15 years.
She until just now had run the Sanger business on April 1st she took over in the organization changed she took responsibility for Biostorage. So Sarah as they head of the bias toward services business understands gene was incredibly well and social help us to identify and capture those opportunities.
I think from a structure standpoint, it couldn't be better we think there's good knowledge of the samples and the opportunities for the samples on the on the gene was side, we see a lot of energy put into that and I I I do hope to be able to report to use some exciting new business here in two three and Q. for.
Got it thanks her color see the olive.
Yeah.
Thank you Oh next question, it's on the line or <unk>.
Okay.
Hi, Thanks, you said one question.
And the performance the gene synthesis of gene with these all Kobe related projects and How're you doing relative to the expanded capacity that just came online.
What I I would highlight is is the.
One thing that made the team. So proud was the fact that in.
Obviously, we'd nobody likes the tragedy, obviously, but what makes teen proud.
Is that we were the first.
Well, we were the first impacted in China, we were the first called not just in China, but the U.S. and the U.K. and Jean synthesis was the necessary elements from Jean was from the beginning there was also sequencing done to help to analysis, but synthesis took on demand for a cool, but it's not.
It it is prevalent demand and <unk> research in his continued but it's not solely that we are seeing demands on other projects continue and and I would highlight as well we were seeing engagements for.
Jean synthesis to continue so this is a core part of our business just got a nice mix record quarter I think the the record there reflects the momentum in the business and the usefulness that that service provides in the research stuff now in terms of capacity to expand our.
Expansion of labs has been critical factor for us from day, one it's it's the most capacity sensitive equation that I have we ditch I will say those who have been with US no that I characterize our storage businesses variable capital is we put freezers in place.
That's a pretty steady run and we we put freezers and row after row as the samples are scheduled to come in but on the lab space you have to make sure that you have the labs the equipment for sequencing on the other side and synthesis you have to have skills the reagent.
<unk> and and we continue to to do fair amount of lab work just in our own r. and d. around the reagents. So so all of this factors into but we make sure. The capacity is there in each region. Steve me, Yeah see to <unk> to be clear the the coven projects were important but they they were relatively small.
All dollar volume so it's not what moved the needle in.
In the synthesis business and the capacity as we put into place one we set up the European lab, where we do not have synthesis. So that was purely.
Analysis.
For a sanger and for N.G.S., New Jersey, we did a major in G.S. expansion. So you see you saw some of that in the ability for us to deliver N.G.S. and the other major investments is in the building and Sue Joe China, which is not yet functional we we already had thing or so we already have synthesis capacity in place and we still have more.
Capacity already in place. So we can continue to grow that business without having to add capital on the synthesis side for right now.
<unk> alright, thank you.
Thank you.
<unk>.
<unk>.
[noise] tidings for taking the question I still talk a little bit about semiconductor demand and where you expect to see it out cutting problem. They share I know earlier in the year at that starting air we talked about churches can add in Korea picking up and started replacing some of that care to in China from 2019.
He's seen any of that pick up at all you know or should we just expect to seem wire sorta care why.
<unk> at that way that continue on.
So maybe we we see both actually that we do see China activity picking up we we have we had a lot two quarters ago. We were on the call. We talked about a law all in China was pretty significant but we had an uptick over the last two quarters. So the the Q2 results remain pretty healthy in in our backlog it's.
Representative of of what we see in Q3 tough to see any farther than that we don't have any different visibility from what we normally have.
We'd say China activity is healthy these days both for the at the end user factory level for products like C.C.S. and certainly for that to your two o. yams.
Great. Thank you.
<unk>.
Our next question, it's on the line of Paul <unk>.
<unk>.
Okay.
I see I guess.
Saying are part of gene was was what was most impacted in the corridor right.
<unk> <unk>, yeah, it feels like that for for the June quarter. Indeed, so we we again, we I think Lyndon put it really well synthesis seems to be pretty steady and healthy and some volatility D.N.G.S., which can be a swing or either way, but sanger, a unless and until the.
Academic facilities pick up and some of the industry gets going that's that's a swing or for us and it's just it's just that a relatively low level. You know shares. Good we know customer captures been tremendous but if the labs if the lab's aren't open that's really slows us down.
Thanks.
<unk>.
Yeah.
<unk>.
John <unk>.
Okay.
Good afternoon, guys. Congratulations on a good results given the operating environment I'm, just kind of curious it sounds like you're prepared comments that covered was perhaps a four to 5 million hit two revenue in the March quarter, I'm, just trying to get a better understanding of what's your embedding for the June quarter and it is that March number right.
Then just relative to the semi business I'm, just kind of curious of your view on what the Commerce Department came out and said earlier this week about intensifying some licensees potentially into China, and what risks that might pose either for your business directly or indirectly.
Yeah. So the the first the four or 5 million that that you references more on the semi side of shipments that we could have made had not been disrupted from one factor or another generally it's a supply chain.
Or prioritization when in talking with customers on what we could provide most fluids like but in total on our business. We estimated so rounds to about 8 million in total including the impacts on the life Sciences, and that's a net impact net of some of the opportunities that we're all.
Driven on research <unk> and consumable shipped for P.C. or plates in the D.N.A. analysis. So.
You asked well how does a shape up for acute three.
John It it it gets more challenging to put a number on Q3, because cue to the demand equation was quite to find and we know what disrupted us and we know coming into Q3 demand has been reshaped a bit by the absence of the market. So I will tell you without.
<unk>, both life Sciences elements were expected to grow sequentially apps and the cold it environment and I can say that without any hesitation at all and so when we talk about being down flat, 8% or I'm, sorry, 5% to 10%, it's a it's a pretty sick.
Can impact for US sequentially, we don't think it's an impact to US you know when we get through this that the market and in fact, I think we've embraced a significant number of new customers on life Sciences on semiconductor similarly.
As you all know it's a design in business and we don't see it impacting us. However, we all know that you know everybody's watching the global economy to see what happens with semiconductor investments for now we haven't had anyone.
Ask for a reschedule or a delay or change and demand in fact, our customers are more active in reiterating their demand to us and emphasizing to us we still need our customers still need what healthy you need <unk>, how can we ensure that it's coming so all my.
Messages to us from our customer in points and send me are full steam ahead and and we're also condition that you know if a crisis is in the making the full steam ahead, sometimes you know as long lived in sometimes it changes. So that's why we say it's a vulnerable time.
Economically.
Let me pause on that went to see if you have a question and I'll address the.
The regular regulations other that's a perfect answer.
Talk about the Commerce B.I.S.
<unk>.
Yeah, So where we are assessing it but our preliminary reading is is it's not affecting us very much. So we anticipate that the most notably if you went back.
Three plus years ago, we had a systems that were under scrutiny and under license requirement and we don't have that any longer we were able to qualify those to not require individual licenses and for that and other early assessments is that we won't be directly affected.
<unk>.
Alright, Thanks John.
Thank you and there are no further question at this time.
Okay.
If if no more questions. Let me just finished the way we started one we one we're really pleased to hear all the analyst on the call with us and we hope that that's an indication that you and your families are healthy and and solid in this environment. It's it's it's it's without question.
<unk> unusual times I will tell you a we couldn't be more proud to be working with an unusual scheme that has march straight through it and has stayed fully engaged and these are.
Disturbing times, but at same time energizing just in the mission that we have two essential businesses semiconductor in life Sciences in the response from our customers in what they need in what they want as support from US has been very energizing force encouraging and we <unk>.
Forward to walking through this quarter stronger and I'm not in delivering on this guidance and we.
Certainly hope that continues to to improve faster than what we anticipate and then we'll we'll talk about the end of the year when we get through this quarter and what they are longer term shame shapes up but we have a lot of confidence that are fundamentals stay in place and we're excited that were in the position that we are.
Thank you very much for your interest with us.
Thank you.
<unk>, let's let's call. We thank you for your participation did you. Please.
Thank you.
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