Q3 2020 Brooks Automation Inc Earnings Call
[noise] Oh Wow.
[music].
No.
[music].
HM.
[noise].
Oh.
Ladies and gentlemen, based on weather comps will begin momentarily, we think usually patients not such a piece I mean.
[music].
Greetings and welcome to the books automation Q3, 2020 financial results.
During the presentation, all participants will be in listen only mode. After which we'll conduct a question answer session.
At that time, if you have a question. Please press the one follow up metaphor on your telephone.
If it anytime during the conference you need to each operator, Please press star Zero as a reminder, this conference is being recorded Thursday July Thirtyth 2020, I wouldn't want us to turn the conference over to Mark Nemeroff. Please go ahead.
Thank you thank him wake up and good afternoon, everyone on the wine today.
You're welcome news regarding the conference call for the third quarter fiscal 2020.
Our Q3 earnings press releases you'd after the close of the market today, that's available on our Investor Relations website located at located at Brooks not invest a room dot com as our supplemental Powerpoint slides that will be used during the prepared remarks today.
Before we start another just like to remind everyone that during the course of the call we'd be making a number of forward looking statements, but in the meeting of the private litigations and securities active 1995. There are many factors that may cause actual financial results and other events to differ from those identified in such forward looking statements.
I would refer you to the section of our earnings release titled Safe Harbor statement, the Safe Harbor slide on our aforementioned Powerpoint presentation on our website and our various filings with the S. You see including our annual reports on form 10 reports on form 10-Q.
We make no all the obligation to update these statements and should future financial data or events occur the different from these forward looking statements presented today.
We may refer to a number of non-GAAP financial measures also during the call today, which are using in addition to and in conjunction with results presented in accordance with gap.
We believe that non-GAAP measures provide an additional way of viewing aspects of our operations and performance well when considered with GAAP financial results in a reconciliation of GAAP measures. They provide an even more complete understanding of the Brooks business.
Non-GAAP measures should not be relied upon onto the exclusion of GAAP measures themselves.
All the call with me today is our president and Chief Executive Officer, Steve Schwartz, and Executive Vice President and Chief Financial Officer, Lincoln Robertson, We'll open up the call with some remarks from Steve on the highlight for the quarter and then they will provide a more detailed look into our financial results for the quarter and our outlook for the fourth quarter.
And then we'll have some time to take your questions. After the after the prepared remarks.
So with that in mind I like to turn the call over to see our CEO Steve Schwartz.
Thank you Mark and good afternoon, everyone. We're pleased to have you with US today as we report results were strong third quarter.
In spite of cobot headwinds and uncertainties, we delivered a solid topline.
Increased profitability and strengthen our market position in each segment.
And we forecast strong growth again next quarter further demonstrating the value of our unique product and services portfolio and our positions into robust markets.
Revenue of $220 million was flat sequentially with Q2 and up 8% year over year.
Earnings per share at 32 cents was up 26% sequentially.
Reflecting our improvements in margins in overall resiliency in a tough environment.
And different from our earnings call just three months ago. When the business outlook was particularly uncertain. We believe that we found are putting in this current stage of the cobot 19 environment and that gives us more confidence about our near term guidance.
When we left spoke with you we were in a peculiar life sciences environment, where academic demand had cratered, but industrial demand in anything related to cope with 19 work was accelerating.
Additionally, at that time, while our semiconductor backlog in demand environment was extremely strong depend Democrat exposed some cracks in the global supply chain, leaving us with some uncertainty as to our ability to deliver to our customer needs.
In retrospect, it was a swift action to trigger our business continuity plans.
That allowed us to overcome this uncertainty and keep all of our 20 plus facilities open and productive.
As we manage through the quarter well had started as a temporary working conditions solidified.
Become our new normal method of work.
We settled into those changes with discipline, a new found enthusiasm for what's possible in a more distant work environment supported by committed team of essential workers, who made the necessary changes to deliver for our customers.
We count ourselves fortunate that we'll be able to sustain business in this mode for as long as necessary.
We're pleased to say that we've seen a steady and substantial improvement in life sciences demand through the quarter to run rates that are almost as they were pre cobot.
Semiconductor demand and supply are robust and still appear to be on the upswing.
And I'd like to highlight one unexpected outcome in this current environment.
During the quarter, we continue to win an extraordinary number of new customers in life Sciences, as well as new design wins in semiconductor setting us up for additional growth and share gains.
I'll give some additional commentary about each of the businesses, but it's noteworthy that this new environment of limited customer contact seems to have enabled more opportunities for companies with strong brand and reputation.
With this as a backdrop will give some color as to the performance of the life Sciences and semiconductor business units beginning with life Sciences.
At $93 million life Sciences revenue was stable from Q2 down only 2% sequentially, but up 6% compared to Q3 of 2019.
Life Sciences services was up 5% and life Sciences products contributed an increase of 9%.
As was the case in Q2 the results from each of the sub segments within those business units vary depending upon whether cobot 19 was a headwind or tailwind, but overall performance was strong and we finished June with positive momentum.
In life Science services, which consists of gene with sample storage services and informatics revenue was $63 million up 5% year over year and down 2% sequentially.
And despite the variability caused by the pandemic our services business performed well in the quarter.
Jim was revenue was down approximately $4 million sequentially, but still managed to be up slightly year over year.
The three major service lines Sanger sequencing next generation sequencing and gene synthesis have begun to stabilize and based on the momentum over the past six weeks, we have confidence in our outlook.
As we reported to you last quarter, when Ngs and synthesis had record quarters Sanger sequencing, which is heavily dependent on academic research had been significantly impacted by a reduction of more than 50% of weekly run rate business that dropped abruptly in mid March with the shutdown of academic laboratories.
And although by late April we've begun to see some slight rebound that are saying or business at that time, we didn't have enough data to declare a trend.
Since then we've continued to experience a gradual increase in demand across the sanger business to a level where for the past four weeks, we've been running steadily at approximately 90% of our pre cobot levels.
To no surprise Europe, and China are at pre cobot levels, but we're still somewhat lower in our U.S. facilities, reflecting the slower and less complete reopening of U.S. institutions.
Still even with the somewhat reduced U.S. academic lab activity are saying a recovery is a positive indicator for us and our continued share gains ought to allow us meaningfully to meaningfully improve our sanger performance in Q4.
Ngs with solid for the quarter down slightly from Q2, but still up 7% from Q3, one year ago.
Importantly, we saw a return to more regular order patterns throughout the quarter and we anticipate a return to growth for Ngs in Q4.
This business comes from a mix of academic institutional and industrial customers as well as in support of cell and gene therapy, providing us with diversification and leaving a subject to less volatility.
Finally, our genes synthesis services continued to be in high demand and we delivered yet another record quarter because of our fast turnaround and high quality product.
At $12 million gene synthesis was up 22% from Q twos record quarter end up 31% year over year.
We anticipate continued strength in gene synthesis in Q4.
Overall, our gene was team has dealt well with the Corona virus pandemic. We've continued to serve customers who will take an extra advantage of the continuity in service that we provided throughout the pandemic.
And we've continued to provide high quality services with fast response and exceptional customer support.
In the sample and repository services portion of the lifes life Sciences business.
We had performance as expected.
Storage revenue was steady as it provides a safe recurring revenue stream.
That said with much of the clinical trial activity on hold our sample administration and registration and sample transport revenue was down as expected. The we anticipate an increase in this area in Q4.
In the quarter, we close three significant srs contracts that are related to cobot 19.
One for the storage of positive tested patient samples and two for vaccine management.
Each of these deals represents multi million dollar revenue opportunities over the coming years, and we're negotiating to more large contracts that have some urgency to close soon.
And the recent realignment to form life Sciences services business unit was already delivering meaningful sales synergies across the service offerings.
In fact, we've expanded our sales footprint for gene was an sample repository services and we do with the addition of arose informatics capabilities not only increase the number of touch points, we have with customer account, but we've also increased the value of our offerings.
In addition to the Srs deals I mentioned, a moment ago. We're also currently engaged in multimillion dollar opportunities and include sample management and genomic services with customers, who initially engaged us for one and services for pleased to have us deliver both of those services.
We are confident this will be a relatively fast uptake and we're enthusiastic about the potential from this added power.
Overall, the life Sciences services business is performing extremely well in this environment.
We've adapted to our customers irregular work environment and even during a time when we've not been able to have direct contact with customers. We added more than 230, new customers in the quarter.
Essentially the same as our high rate of wins in the pre Copa days, when direct customer contact with the norm.
Some of these wins came via our usual channels, but many new customers came to us because of our ability to deliver results for them. After they lost access to their prior sources and these are customers that we fully intend to keep.
With the current momentum exiting Q3, we anticipate growth in Q4 with sequential revenue increases from all areas of the services business.
I'll now turn to life Sciences products, which consists automated stores in service for that equipment as well as cryogenic sample management equipment and consumables and instruments.
The products team delivered a very solid quarter revenue was essentially flat with Q2, but up 9% from Q3, one year ago.
The flat sequential result was made up of decreases in stores and onsite services revenue due mostly because of lack of access to customer sites caused by cobot restrictions.
Balanced by Cobot 19, Tailwinds in our consumables business, which includes PCR tubes for diagnostic kits.
Which was up 16% sequentially and almost 40% year over year.
I'll note that revenue from the stores and services businesses simply postponed and we forecast it will make it up over the next few quarters.
The products business unit also continued to improve gross margin performance Notching up another 40 basis points sequentially and more than 800 basis points from Q3, one year ago.
Additionally, we booked $20 million in large automated stores, including a significant project for a major global pharmaceutical company that will consolidate and fully automate a collection of compounds that's been decades in the making.
Our outlook for life Sciences products is for continued growth in Q4 of at least 10% sequentially, but with further upside to that number if and as were able to have free or access to customer sites. So that we can continue our installation and commissioning work on stores.
It's important to note that the life Sciences products business share gains were also very high as we added more than 120, new customers to our ranks.
Approximately 100 for consumables and instruments products and more than 20, new customers for cryogenic sample management products that serve predominantly cell and gene therapy customers.
Or through the asked about the project progress at this team is making and the market momentum they've generated as we close out fiscal twentytwenty and head into 20 to 21.
I also want to calibrate you on the performance against our targets for what we previously reported as the sample management business.
We're pleased to report that even in this cobot environment, we have to this point track to work commitments for the year.
In Q3 sample management delivered 7% year over year revenue growth and gross margins continue to hold at the improved levels already at or above our target.
Furthermore, we see a clear path and life sciences products to achieve a 10% year over year growth in Q4.
But we still need clinical trials to resume for us to register the same kind of gains in the sample storage portion of sample management.
With the backlog, we're carrying entering Q4, theres plenty of opportunity, but will be somewhat bounded on our ability to deliver unless customers can resume their sample collections.
Nonetheless, we're confident that the elements that make up what was sample management are all delivering on their potential.
To summarize the life Sciences business time again, we've proven the value of our unique portfolio of life Sciences capabilities. We added 350, new customers in a no contact quarter.
We continue to whether this unusual environments in a positioned ourselves for a very strong Q4.
Energy and enthusiasm or high end, we're pleased with both performance and our position in life Sciences.
In the semiconductor business, we had another record quarter revenue at $127 million was up 2% sequentially and up 9% year over year.
This business has the momentum that comes with high end still expanding market share that's compounded by the increased need for the technologies that we develop as well as the geographic expansion the customer base in Asia, where we are particularly strong.
On our last call, we mentioned that we had backlog in demand to allow us to deliver another record quarter, but at the time, we had some uncertainty in our ability to secure all of the parts we needed from our supply chain as well as some questions about our customers' ability to accept product from us if their manufacturing lines did not need what we could produce.
By the middle of the quarter, our supply chain team had worked upstream and downstream to ensure that we have adequate supply and our teams were able to meet all customer demand.
Note worthy is the fact that we also had a significant mix change in our output with automation products filling in the gap from a reduction in contamination control solutions.
And we're forecasting Q4 to be the third consecutive record quarter for the semiconductor business.
For sometime now we've outperformed the overall market for semi GEC semiconductor capital equipment because of our share gains have been compounded by strong secular growth drivers, namely the increase in the number of vacuum process steps and the relatively recent a necessary introduction of contamination control process steps that are now require.
Year to produce a leading edge semiconductor.
And we see this strong growth continuing into the future.
Over the years, we've been speaking with you about our design win capabilities in the importance of working on products and technologies that are still several years from high volume production.
The increased market share and elevated business levels that we have today, we're for the most part one several years ago. When our products were designed into processing equipment for seven in five nanometer technology nodes.
Our market capture Formula is straightforward.
But not simple.
Our engineers and scientists engage our customers to work on their future Roadmaps are capabilities are designed into process tools, which go to pilot production lines that chip makers and these tools are ultimately qualified for volume production.
After what sometimes two or three years from a design win Chipmakers, then ramp volume production in the process tool.
Technologies that were qualified for the stringent capabilities are the ones that are ultimately purchased in volume.
So effectively today's business is from yesterday's work.
The same technology qualification practice holds true today, and it's what makes us, particularly enthusiastic about the future of our semiconductor business.
By any past measure Q3 was an exceptional quarter for design wins with 51, new design wins, including 16, new wins for Ccs products and seven for advanced packaging.
This is future market share secured today.
I will now give some specific color from our major semiconductor business drivers to a lot imations advance packaging and contamination control solutions.
Automation products accelerated in the quarter with a 20% sequential jump from Q2.
Up 5% from one year ago more than making up for the digestion period, we experienced in contamination control.
Both vacuum robots and vacuum systems exhibited strong sequential growth driven by Fiveg expansion and European and Chinese customers.
Furthermore, our Q4 outlook is for vacuum automation to grow again and surpassed the previous high quarter revenue from the June quarter in 2018.
We had more solid performance in our advanced packaging product sub segment with revenue at a very healthy $14 million up 4% sequentially, but 30% below Q3, 20 nineteens record quarter.
In addition to the design wins mentioned above we are beginning to see increased activity in this space and weren't as strong positioned to benefit us more advanced packaging capacity is brought online.
We're still in a moderately column environment as automotive is in a low but we anticipate reinvigoration in this area and Twentytwenty one.
The contamination control business continues to demonstrate characteristics of exciting new technology with high growth and rapid new customer adoption.
Coming off a torrid first half of Twentytwenty, which delivered $90 million of revenue Q3 moderated to $35 million.
But we're still our third highest quarter ever for Ccs.
This is an important result for many reasons and one that gives a strong indication about the future for this business.
Over the past four years, we've doubled the number of customers for Ccs products.
By and large this increase was driven by the need to add Ccs technologies into the manufacturing process flow for companies to be able to yield at new technology nodes.
We've continued to win these new adoptees as Weve exceptionally high market share at leading edge device technology nodes.
In total we anticipate Q4 to be another growth quarter in the semiconductor business share gains in new product and technology development are different pace and the organization is humming.
We're putting the largest strains ever on our engineering and manufacturing teams, but we trained for this.
And we're ready for this business and tickets to the next level.
All in we are extremely positive about our near term outlook life Sciences, returning to a ramp and semiconductor demand remains strong at our factories are busy.
Following on a very solid Q3 were positioned extremely well in two great markets and we're aiming for Q4 to be a record high in both segments.
Our market position is the best it's ever been and we feel that getting stronger by the day.
We thank our employees for living up to all the responsibilities in privileges that come with being an essential business and we thank you as well for your support Brooks.
That concludes my formal remarks about the quarter and I'll turn the call back over to limit.
Thank you Steve.
I'd like to refer your attention to the slides on the website starting with slide three.
Certainly the stable revenue on a quarter to quarter basis stands out against the backdrop of the cobot environment.
As does the expansion of the earnings profile, we have some really good signals in the business dynamics that I want to summarize here, which I believe you will see as we stepped through the details.
First the near term stability translates the year to year revenue growth of 8%.
You will see that our semiconductor business results reflected demand ramp as expected and supply chain execution better than we could have hoped for when we started the quarter.
And the life sciences businesses seeing areas of exciting growth as well as areas that are still impacted by the covidien operating environment.
All in both areas show stronger at the end of the third quarter than at the start and finished on a higher ramp up demand as we entered Q4.
Next the earnings expansion on the stable revenue bring some clarity to the potential of the business profitability.
Gross margin strength in the semiconductor segment and the life Sciences products business provides strong operating margin expansion and while the life Sciences service business has been lower in the cobot environment is easy to see there is further potential in the gross margin expansion when services strengthens.
Non-GAAP earnings per share grew 26% sequentially and 60% higher than the same quarter last year.
Finally, while the business model shows its resiliency the revenue and income growth is producing incremental free cash.
We have a strong balance sheet and liquidity to weather storms, but more importantly to continue to make investments.
Let's move on to slide four and review the details of the overall piano.
From a GAAP perspective earnings per share of 19 cents was six cents better than last quarter.
Revenue was the same at $220 million, but expansion came with stronger gross margins and reduced.
Operating expense.
Below the operating income line other income was a quarter to quarter benefit of 1.7 million, principally driven by more favorable foreign exchange.
Looking to the right state of the page you can see the non-GAAP performance.
Gross margin line shows more than 100 basis points expansion on both compares of year to year in sequential.
When we get to the segment pages, you will see stronger margins in semiconductor and continued strength in life Sciences.
In the product site, which drove the expansion.
During the quarter cost and expenses in the business at varying dynamics, we have kept all employees onboard through the crisis and we paid employees a premium through the month of May if their presence was required on site to meet demands.
Labor was well utilized on the semiconductor side of the business, but less so on the life Sciences services business with the coded headwinds.
Meanwhile, we saw lower expenses and travel and other discretionary lines as well as and some employee related benefits.
R&D expense line saw lower spending and semiconductor with the completion of certain projects in the second quarter.
And of course, the result of expanded gross margins and these lower operating expenses brings a significant growth in the operating income line, which is at $30 million up 15% sequentially and 15% year over year.
Moving below the operating income line you can see the net interest expense was point 8 million lower by about $7 million compared with last year. When we were carrying debt associated with the gene was acquisition.
And as mentioned earlier, we experienced lower FX FX impacts this quarter.
Non-GAAP tax rate for the quarter came in at about 21% and the bottom line non-GAAP earnings per share through that 26% sequentially and again, 60% year over year.
Perhaps it just it helps just to take a moment put to 32 cents per diluted per share.
Per diluted share for this quarter into perspective of where we are in terms of the leverage ramp.
For all of 2019.
EPS was only 76 cents.
Let's turn it over to slide five to discuss the segment results starting with life Sciences.
In the third quarter life Sciences revenue was slightly lower sequentially at $93 million and demonstrated 6% growth compared with the third quarter last year with some moderate headwinds due to cobot 19.
On an organic basis life Sciences grew 5%.
Growth. This quarter was led by our life science products business, which consist of our automated pulled store systems consumables and instruments and associated post warranty service.
The products business experienced 9% growth driven by higher demand across all consumable lines and in particular demand for 96, well PCR fleets, which are fundamental to research for the coated vaccine.
The automated store systems business experienced some headwinds as anticipated with a continued constraints in accessing customer sites for the installation process.
And our life Science services business, we achieved 5% year over year growth.
This was driven with 1% growth in gene was genomic services and 12% in sample repository solutions, formerly referred to is biased storage.
In gene was where we continue to see the strongest headwinds of the cobot environment singer and Ngs sequencing, where lower quarter to quarter, while genes of this expanded.
That could impact was most pronounced with the extended closure of academic research institutions and reprioritization of projects by commercial labs.
As Steve noted, we started the quarter with our global daily run rate for Saturn running less than 50% of though the pre covert days of January February.
The orders have shown a steady pickup week by week and are now just approaching the precluded levels.
It is our assessment at this level of order rate is still coming from a subset of the market with the academic sector only partially back to work in their lives.
Gene synthesis on the other has demonstrated nice growth during the quarter in a supporting orders from coated research activity.
In total.
The gene was business was lower by approximately 9% for 4 million on a quarter to quarter basis, but still finished 1% higher than a year over on a year over year basis.
Now shifting over to the sample repository solutions, which again was formerly referred to as bio storage.
That business was 10% higher on a sequential basis and 12% higher year over year.
This growth includes 1.9 million from the rural software acquisition that we made earlier this year and also 4% organic growth.
Under the covers of the 4% growth year over year, we saw year over year expansion from the alliance and from storage billings, but transactional services, which depend on the movement of samples by customers were dampened and mitigated the growth.
As Steve described while we've been pleased with the ongoing engagements for storage services, we're not seeing storage collections being managed as aggressively in this cobot environment, except in the vaccine and research initiatives.
Life Sciences gross margin for the quarter was down 120 basis points sequentially, but still showed marked improvement of 140 basis points year over year.
As in the past a highlight that when we carry more revenue from the are you CDR Alliance, we do see a negative mix impact.
Except for this negative mix impact, we have very stable margins quarter to quarter, and even higher improvement on a year over year basis than you see on the page.
At year over year improvement was significantly driven by the products business, which has held onto all the progress that has made over the past year and is up 870 basis points year over year.
Meanwhile, the remaining portion of the services business. Excluding the alliance was also relatively stable sequentially, but is performing 130 basis points below the levels one year ago due to the lower labor utilization in this cobot environment.
As a reminder, we've kept all employees on board during this environment and we provided that premium pay to employees coming on site until the first of June.
Except for these aspects, we see no substantial changes in our pricing and cost and expect service margins to move higher as we recover the additional revenue.
Looking forward to our fourth quarter, we see some recovery in life Sciences Rick.
In fact occurring.
We are starting this quarter at a higher level of throughput and the range depends on the extent of the continued recovery.
At this point, we expect life sciences to deliver revenue of 95 to 100 million sequentially. This would be up about 2% to 7%.
Let's turn it over to slide six and review the semiconductor business.
Semiconductor solutions shows nothing but strength for the quarter generating 127 million, a 2% increase sequentially and 9% growth year over year.
The sequential growth, even though not a large number was an outstanding accomplishment given this supply chain challenges, we faced last quarter.
Customer demand remained high during the quarter, despite cobot as fab capital spending plans continued.
Our ability to meet the demand was a testament to the hard work of our semi operations team in order to satisfy the needs of our customers.
Within the automation growth, which Steve described vacuum systems to tier two OEM customers were up 26% from second quarter and now is at a level, 5% above the prior year period.
On the other hand contamination control solutions revenue as expected was lower by 24% sequentially.
But this one still remains 22% higher year over year.
This high level of Ccs revenue $35 million in total demonstrates less dependency on foundry and increased growth capability from the broad design wins and qualifications across many customers.
We expect that demand of our food cleaners, and radical stockers at leading edge Fabs will continue throughout this year is we are qualified in memory as well as advanced logic Fabs.
The profitability I'm sorry, the profitability is another feather in the cap for the semi business.
Operating margins were up 510 basis points sequentially, reaching 18.4%.
This was 320 basis point improvement in gross margin, which reached to 42.7% in the quarter.
The gross margin improved sequentially and on a year over year basis, driven by improved factory absorption on higher robots and vacuum systems production and improved mix and in the contamination control business as we shift to a more diversified customer set this quarter.
Looking to the fourth quarter demand for semiconductor products remains high and we will need to deal with continued supply chain challenges shows associated with the risk of cobot, but we expect our semiconductor business to deliver revenue.
Of approximately 134 to 141 million.
Sequentially this would be up 5% to 11%.
So now let's turn it over to slide seven for a summary of our cash flow for the quarter.
We generated 26 million of operating cash flow, while affording expansion of working capital for the react ramp in semiconductor solutions, we used approximately $9 million for Capex, resulting an 18 million of free cash flow.
On the year to date basis, we've generated 78 million of adjusted operating cash, which is 19 million higher than the year to date period of 2019.
On slide eight you'll see a summary of the balance sheet.
We increased our cash position by 15 million in the quarter and we're now carrying $263 million of cash cash equivalents and marketable securities.
With a 51 million of debt you can see we'll have $213 million of net cash for operations in investments going forward.
Now ill turn over to slide nine with me I'll wrap up the guidance for the fourth fiscal quarter 2020.
Revenue is expected to be in the range of $229 million to $241 million.
Adjusted EBITDA is anticipated to be 41 to 49 million and non-GAAP diluted earnings per share to be 32 to 40 cents.
The GAAP diluted earnings per share is expected to be a 20% 28 cents.
As noted on the chart, where core still operating in a koeppen environment, some headwinds and certainly the risk of some changes around the world.
On an all we are seeing we expect growth to continue for both segments in the fourth fiscal quarter as described.
This now concludes our prepared remarks, and I'll turn the call back over to fully could the operator take questions from the line.
Thank you.
Ladies and gentlemen, if we would like to register for question. Please first one fallen through the Florida and telephone.
You will hear.
With knowledge to close.
A question has been so I would like to withdraw your registration keys, but the one follow up modestly.
Ladies and gentlemen, compared to one for if you have a question.
Okay.
Next question given the first one is from the.
Patrick Ho.
Ill describe your line is open.
Hi, Patrick how are you.
Good. Thank you very much and congrats on the really nice quarter, maybe first off on terms of the semiconductor business, obviously you're seeing.
Some strength continuing into the September quarter, you've talked about the supply chain issues.
Becoming better.
June quarter progress as you look at those two variables how much do you believe the supply chain constraints that you've seen improvements and are on your rent versus your customers getting some alleviation is on their manufacturing side of things, which allows you to deliver products.
Adding more quicker pace is it more on your end that you've seen the improvements or is it more on the customer end.
Patrick if I understood. The question I think I think we are we know our supply chain. The best that we had some this comfort about the ability to to supply we had some product coming from Malaysia, Some coming from India places that became hot spots in the quarter, but we think we manage it pretty well we went so far sometimes is to help some.
Those supplier secure.
Shipping and transportation to be able to get parts to us.
But the thing that we Didnt know was was that same supply chain back things up in our customers and just have them not need our product. So I think we were fine a securing our supply chain and being able to meet the demand we weren't sure that the demand would necessarily hold up.
From the customers, but indeed, everything loosened up and we were able to we're able to ship everything that the customers wanted from us in the quarter.
Okay, Great that's really helpful color.
On the life Sciences, and I think we're seeing the how diversified portfolio and services offerings are odd that's allowed you to kind of meet expectations or exceed expectations, giving them. The various moving pieces. You mentioned you saw some surprises to the upside some areas were weaker how does.
This play into I guess the longer term strategic vision of your life Sciences portfolio is this diversification. What you were looking for in terms of offsetting potential strengths and weaknesses, depending on the market environment.
So Patrick I think indeed, that's the case the a couple of things were accelerated here I'll give you. An example, when we combined to form the life Sciences services business unit by putting in the bias storage capability in with.
The gene was team what we found is that expansion to something that was on the on the radar for us, but one that simply accelerated because of the cobot environment.
It's in the name change we used to be the.
Bias storage services and now with sample and repository, we took on some vaccine.
Contracts. So we're taking on some manufactured product and some other capabilities to be able to distributed.
Finished product if you will as part of the.
Business unit.
The contracts that were forming between the the customers who would had either genomic services or sample storage. This sales teams are now engaged in one or the other and then they asked the customer for example in storage project will you do with those things kind of help you with the measurement and we're discovering that they are an abundance of opportunities there.
So things that we suspected we're now putting to contract and we're discovering the indeed there there are a lot of opportunities. We can have to simplify the customer supply chain and provide them just a tremendous amount of of this combined service. If you will on the on the life Sciences product side I think the team has a lot of momentum.
From an operating standpoint, the margin improvements continue.
The confidence in the ability to go sell really reliable products is also helping from a market share standpoint.
That seems got a lot of momentum.
Great and final question for me Lynden, obviously.
Probably gotten some benefits from the Opex line due to.
Lower travel.
Other yes that probably are occurring right now as you get to a more normalized environment.
One where do you see expenses Putin tool, increasing too or are you able you expense at current levels given the current.
Can be applied at a future date.
It's a really good question, Patrick and as I mentioned in my remarks.
The way we had some projects paused also our finished I should say in the semiconductor space in the R&D and SGN, a you're exactly right had some light areas for us in this environment, we do see a couple million pressure going forward on a.
In the near term and we think it should be.
Safe to be in that range, a couple of million higher but.
But we also don't expect all the discretionary to combat privately.
Great. Thank you very much and congrats again.
Thanks, Patrick Thanks, Patrick.
Thank you.
Question on the line of Jacob Johnson.
Thank you. Please go ahead your line is open.
Hey, Thanks, and I'll Echo Patrick's comments, congrats on strong quarter I guess first question can we just an update on the synergies between the bias storage business in general as now that these businesses are managed under one roof.
It sounds like you guys have seen some initial wins, but any other color and kind of realizing the synergies from these two businesses.
Yeah, Thanks, JB Linden and I will share. The response I think we're starting to see topline synergies, but but frankly the businesses is not performing at a high speed yet so we won't see some of those cost synergies yet.
But we're really bullish the combination of the teams the fact that the leader of the.
Sample Ortale promissory services business came from the gene, which is one of the gene was leaders.
She knows how to operate inside the environment. So the connections with sales the connections with the account teams and customers. So far has been outstanding we are looking to get volume.
Built up in both sides of the business as a result of this combination and there will be able to be a little bit more articulate about what some of the the profitability synergies are but right now we're starting to feed on the topline. We mentioned three contracts, we called out three contracts that over the next three years each of them exceeds the million dollar so.
As a small start but all meaningful and really representative of we think's possible by the combination of these businesses.
Yeah.
Jacob.
Is that what we see is mostly in the people in our business, putting this together and taking the leadership from gene was integrating with the leadership from the bias storage background.
Got people from the science, we got people from precision medicine backgrounds, we got people from.
The infrastructure background, working together and and this the strategies that weve had around the hub the sample hub strategies, we've had around sample processing and the insight that they're offering from the.
From the.
Customer side of things the science side of things is just been really impactful on how we can propose to these customers further than on the cost and.
Synergy there we're seeing how we can combine.
And proposed cross offerings to customers and.
And then make that a synergistic sale from the same sales team as well as leverage the value statement.
And of course, we've got.
Some lab space being developed insight bias towards which gene was will make use of and and some lead opportunities going back and forth. So it's starting to happen you know we're not.
We've said so far we wouldn't surface numbers for a model, but we're certainly seeing and start to happen.
Got it sounds like you've had some nice wins, Eric mentioned, just one more for me.
Your analyst day last year, you talked about some efforts to expand your penetration into the academic and government markets.
Yeah with academic labs kind of close I guess, they're opening backup or open back up.
Is this is still sell a focus or have you reallocate resources that kind of focus on pharma and biotech clients in the current environment.
Jack It was still very much a focus and we look forward to report on some meaningful results as we get into 2021. So it's still a real area for focused and then.
An area for great traction actually.
Great. Thanks, Steven line that you, but thanks.
Thank you.
Our next question is from the line of John Pitzer with Credit Suisse. Please go ahead. Your line is open.
Hi, John you guys. This is guided Diane I'm here for John right now, but congrats great quarter guys.
I just had a question about semiconductor solutions side of the business. We've heard a lot recently about worried that W. E spending sustaining into the second half you know memory spot pricing a little bit week, Intel pushing out Capex. Just wondering what are some drivers you can have quite gets too to how this business has kind of.
Starkly outgrown the industry has been relatively insulated whether that's on product side design wins kind of the diversified set of your customers.
Just kind of would love to hear a little bit more about that going forward.
Yeah. Thanks, it's.
It's a it's a fairly good question is the one that we ask everyday but let me give a little bit of color. So we had really strong foundry drivers in anything thats at the leading edge technology has a high content of a vacuum technologies, where we have particularly high share and of course, the contamination control is essential and pervasive so thats been a driver today.
Great.
When we look forward, we'd anticipated that at the end of Twentytwenty, maybe early twentytwenty when we might begin to see some additional tier one foundry spending for even three nanometer, but we understand that will be pushed a little bit that said any activity in China just to give you some indication.
Is it.
An outsized driver for us because there are a number of Oems.
Who are dependent upon our vacuum automation technologies, both at the robot and systems level and it's something that we don't see in a big way, maybe measuring overall Wi Fi, but because we have such high content.
That it doesn't take a whole lot of that spending to move the needle for Brooks and I think you've seen that over the past years as we continue to expand outside of of Wi Fi just because of the content we have.
Similarly, the actually the region with the largest number of CCF customers for us in the World is China by a lot. So the number of Ccs.
Customers is highest in China, and Thats been a really an exceptional region for us and so when we mentioned 16 design wins for Ccs products.
[music].
You know to pretty significant when base in China in the quarter.
Great. Thank you very much.
Thanks, Doug.
Thank you ladies and gentlemen, other reminder, once again if you have a question. Please press the one followed by the floor.
Once again is one for.
Next question is from line of Joseph Congruent with Needham. Please go ahead. Your line is open.
Hi, Joe Hi, guys, Hey, thanks for taking the questions. So for the first line.
I see the color on gene waves nice to see Sanger.
Bouncing back a little bit.
But given the slower to return academic research I guess first question do you haven't view of the.
Percentage of academic I'd be happy customer base that has returned to normal and then where do you see that by the end of the calendar year. Thanks.
So Joe we're hopeful that we'll we'll be back to 100% that where we were pre cobot.
Right now.
Here's here's the dilemma for US is we don't know if some of the things that we receive were just pent up.
Things that people finally got back and we saw.
Pretty strong surge, but I will tell you that we've had about five consecutive weeks.
Almost flat levels that are about 90% of the level that we had before so we're still digesting in the customer base in particular, but the academic labs are not uniformly back.
It's still pretty regional.
But.
We anticipate that if we get.
This to be within 10% of where we'd been is already what we think is really strong performance.
We're modeling that in our future, but we're hopeful that will be higher than that by the time, we get to year end just to just to give you. An example, but thats how we that's how we based our forecast kind of stay at these levels for now.
Okay, great great.
And then last question.
We've been getting a lot of questions from investors on Intel and their delay of B seven nanometer chance.
So we just curious how does that affect your business and it is having an impact on the outlook for contamination control Andreotti design wins.
Thanks.
Yes, it and so for us.
It's difficult to say.
In the near term what would happen, but the capacity will go somewhere in the technologies that are required to manufacture.
Those devices, whether by Intel or by somebody else will still go to manufacturing capability. So we will catch up to it.
We're just not sure in what country in what fab, but we were pretty confident in the technologies that are required in our market share and market position.
And.
So ultimately we care some but we don't have the care.
Necessarily where it ends up to.
To be secure in our market position about serving.
Okay, great great. Thanks to their yeah, thanks for that and congrats on the great quarter you guys.
Thanks, Joe.
Thank you.
There are no further questions today.
Thank you.
While we could thank you very much for coordinating us and to all the analysts and investors. We really appreciate the attention in the time that you give us.
And we'll take one last opportunity just say thank you for the employees of Brooks around the globe that have not just participated but state remain diligent and dedicated to everything we added deliver.
Throughout this crisis, and it's still tense and still stressful. So we appreciate them every day.
More importantly.
Our equally important I should say our customers.
Still need us and they're looking for us to do more this next quarter than what we did this last quarter. So we look forward to doing again and talking to you. All again. This time next quarter. So thank you very much.
Thank you, ladies and gentlemen that does conclude today's call. We thank you for your participation could you. Please disconnect your lines.
[music].