Q2 2021 Brooks Automation Inc Earnings Call
[music].
Greetings and welcome to the Brooks automation Q2, 2021 on the financial results.
During the presentation, all participants will be on listen only mode.
Afterwards, we will conduct the question and answer session.
At that time, if you have a question. Please press the one follow up on the for on your telephone.
At any time during the conference you need to reach an operator, Please press star zero.
As a reminder, this conference is being recorded Monday may 10th 2021 all of them.
Now I'll turn the conference over to Sarah Silverman Director of Investor Relations. Please go ahead.
Thank you operator, and good afternoon to everyone on the line today, we would like to welcome you to our earnings conference call for the second quarter of fiscal year 2021.
Earlier. This afternoon, we also issued a press release, describing plans for separating our company into two independent publicly traded companies one first semiconductor business and one for our life Sciences business.
We will use this call to also address this important announcement.
Both press releases that were issued after the close of the market today and are available on our Investor Relations website located at Brooks Dot Investor in Dotcom and addition to the supplementary Powerpoint slides that will be used during the prepared remarks today.
I would like to remind everyone that during the course of the call we will be making a number of forward looking statements within the meaning of the private litigation Securities Act of 1995.
There are many factors that may cause the actual financial results or other than the 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 the aforementioned Powerpoint presentation on our website and our various filings with the SEC, including our annual reports on form 10-K, and our quarterly reports on form 10-Q.
We make no obligation to update these statements the teacher financial data or events occur that differ from the forward looking statements presented today.
We may refer to a number of non-GAAP financial measures, which are used in addition to and in conjunction with results presented in accordance with GAAP.
We believe the non-GAAP measures provide an additional way of viewing aspects of our operations and performance, but when considered with the GAAP financial results and the reconciliation of GAAP measures. They provide an even more complete understanding of the Brooks of business non.
Non-GAAP measures should not be relied upon for the exclusion of the GAAP measures themselves.
On the call with me today is our President and Chief Executive Officer, Steve Schwartz, and our executive Vice President and Chief Financial Officer Lindon Robertson.
We will open the call with remarks from Steve on the announced separation and on highlights of the second quarter.
Then lindon will provide a more detailed book into our financial results on our outlook for the third fiscal quarter of 2021.
We will then take your questions at the end of the prepared remarks.
With that I would like to turn the call over to our CEO Steve Schwartz.
Thank you Sarah and good afternoon, everyone.
I ask you to please refer to slide three of our presentation materials as I begin my remarks.
This is the big day for Brooks and for our shareholders. We just announce perhaps the most meaningful strategic actions since our decision to step into the life sciences market almost a decade ago of declaring our attention to separate the semiconductor and life sciences businesses into two independent publicly traded companies.
The move that we believe will allow each of the businesses flourished independently and pursue even more growth and profitability.
Additionally, and I hope not completely overshadowed by this news will use some of our time to report to you on the highlights from our outstanding second fiscal quarter results to continue the momentum of our performance over the past several years and the reinforcement that this separation is the right strategic move and that now is an appropriate time for such a structural change.
I call your attention to slide four.
As most of you were aware of in 2011, when we were of pure play semiconductor capital equipment company, we made a strategic decision to utilize our core automation and cryogenic technologies to address customer needs in the life sciences market, thereby growing our new business.
Over the years, we made several acquisitions and significant investments in new product development to capitalize on the life Sciences market need for critical sample management we.
We started by solving the challenges of automation and cryogenic environments, and then we engineered systems and consumables products to ensure the fidelity of critical biological samples throughout the entire cold chain of condition.
Intimate Lee we added capability for interrogation of the samples with high quality genomic measurement solutions. The complete the full sample to answer workflow.
With our focused portfolio, we positioned ourselves as a critical link in the life Sciences drug discovery market as a provider of a unique value proposition that solves real customer needs and though we've experienced much success growing our sizable profitable business. We're still on the earliest days of this growth opportunity and as you've heard from us over the years where inverse.
Sting and innovating to remain in front of this tremendous opportunity.
Over the same period, when we were developing our life Sciences business, we simultaneously re crafted our semiconductor portfolio through strategic acquisitions, and divestitures and we targeted the substantial organic investments in technology on product development to create of one of the kind of automation franchise, that's established leadership positions in secular growth markets.
With the acquisition of precise automation, which we completed on April 29, we added yet another secular growth vector and laid the foundation for our expertise in semiconductor automation will enable us to add value and new markets that are in great need of highly sophisticated precision automation capabilities. The.
The combination of our vacuum automation and contamination control solutions has consistently outgrowing the semiconductor wafer fabrication equipment market by a substantial margin and we are positioned to continue this outperformance in support of the next generations of semiconductor device technology currently in development.
The results of this work is that today, we have two cash generating businesses of scale and profitability and while in the early days life Sciences borrowed heavily from the semiconductor technical team for support of late each business is now self reliant on its own capabilities and we're running semi end of life Sciences as two independent business units, which.
Takes us to slide five.
Although many of the market dynamics of these two businesses are quite similar that is both strong growth markets in need of demanding scientific and technology applications that we serve with our unique market leading portfolio of offerings. There are differences in the markets themselves.
The customer requirements and the go to market strategies to best serve each of these markets and each of these businesses has its own set of growth opportunities that will best be captured from the singular focus of management.
And funded by their own capital structure.
We are energized by the opportunity to unleash each of these businesses as independent companies and on all of them to pursue significant growth vectors that we believe has the potential to drive meaningful shareholder value faster than what we'd be able to accomplish in our current construct.
With the speed of the changes in each of these markets adaptability will be of key weapon for each business.
So we're at a point, where we're ready to offer to companies both with sufficient scale to standalone, both profitable and cash generating each with significant market opportunity for the foreseeable future and each with its own balance sheet to be able to unleash the power.
On slide six we present, a simplified view of these two companies as you already know the ICH is fully staffed the continued to grow at least as fast as they have from the start each will have a sufficient capacity to pursue M&A and the cash flow to invest organically in pursuit of their potential.
Linda and I will remain with the life Sciences business on a go forward basis, and the Brooks automation company will be headed by Dave true Zynga as CEO, David has more than 25 years of semiconductor industry experience and is a 16 year veteran of Brooks <unk>.
He is currently the president of the Brooks semiconductor solutions group and he's assembled a strong team of experienced and innovative function of leaders.
Davis the idea of leader for this company the.
The Brooks CFO will be Dave Pizza, and Tony another longtime Brooks executive who has held numerous financing operations positions at Brooks and who currently serves as the corporate controller and principal accounting officer.
Many of you know day Pizza and Tony has over the years. He has represented Brooks at several investor conferences.
For two days of worked together for 15 years, they've been instrumental in the success of the semiconductor business and there are of team ready to take the range of the automation company.
We're still planning the details are on many of the aspects of the two companies, but most of the personnel planning is complete.
In terms of capital structure, we will assure that at the time of launch each company will be able to make acquisitions and fully fund the growth.
Moving to slide seven.
In life Sciences, we hold the complete portfolio of sample management capabilities that offer customers. The single source for sample management needs to the extends from sourcing through genomic analysis, including the long term storage and handling of the samples in many cases across different geographies and often entrusted to us for years or decades at a time.
We are rapidly establishing our position on what we view as the market opportunity of around $10 billion, and our offering and capabilities give us confidence that we're positioned to demonstrate more high growth over the foreseeable future.
Most importantly on slide eight we gave a preview of the next growth vectors that we aim to capture as these opportunities kind of only germinate from the sample based foundation that we possess.
From our current fundamental starting point, which is fueling our strong organic growth to date, our genomics and molecular biology skills gives us a path to the enhancement of novel modalities as genomics is at the core of cell and gene therapy mrna and viral vector based solutions as a standalone company, we can more easily and clearly charter path to additional.
All of these in support of these high growth high value of trajectories.
Additionally, we plan to expand the value of of repository collections and leverage these capabilities across broad customer interest of cohorts from sample sourcing through data analysis.
This growth vector is the continuation of current value added services, but with more emphasis on data from a broader set of samples.
We are of a similar opportunity on the semiconductor business, which is segmented on slide nine we have a lineup of first class products that have served the semiconductor equipment market for more than 40 years we've.
We've invested in the advent that our way into the number one positions in multiple process applications across all manner of semiconductor manufacturing.
For more than 700 patents on our skilled engineering teams are actively engaged with customers years in advance of their needs, thereby securing their future and hours.
On slide 10, we highlight that the semiconductor business provides not only of solid foundation for continued healthy organic growth for that the combination of core technical expertise operating skill and strong systems engineering capabilities, along with precise automation as collaborative robotics and motion control of specialty provided us the head start on of new vector of growth from these combined.
Capabilities.
Whereas our semiconductor automation business has been growing greater than 40% of late the collaborative robot space is approximately doubling in size every year and it provides us with the as exciting and opportunity of life Sciences did and we are keen to pursue growth along this path.
Finally, a recap on slide 11 that we are deep in the planning for the separation, which we expect to complete by the end of this calendar year.
We're looking forward the standing up two new companies, which are both ready to take advantage of their independent structures and enhanced focus.
We believe that each of us uniquely suited to capture and deliver value in their respective markets Linda.
Linda will have some more to say about the separation of his remarks, but suffice it to say we are energized by the potential of these two independent businesses and we look forward to two bright futures.
I will now give some second quarter highlights for the businesses, which I believe supports in every way our move to take advantage of our robust markets. Our strong market position and why now was the time to unleash each business unencumbered. The further deliver on our almost limitless potential.
Q2 revenue was $287 million up.
Up 30% year over year with strong growth contributions from both businesses.
Semiconductor was up 26% on life Sciences was up 36%.
As a phenomenal results by any measure the lumi consider that they are more reflective of our consistently strong performance than of onetime ramp that is the remarkable part of the story.
I will now breakdown each business with some highlights beginning with life Sciences, where we delivered another exceptional quarter.
Revenue was $130 million meaningfully eclipsing the $500 million annual run rate and was made up of strong performance in both services and products.
Services revenue was $77 million up 20% year over year, driven primarily by next generation sequencing and synthesis net.
Gen sequencing revenue was $20 million, an increase of 24% over prior year and the solidly positioned to sustained growth throughout the remainder of the year.
We have several new contract opportunities related to the launch of new capabilities, including solutions for AAV gene therapy.
<unk> revenue continued its outstanding growth as we tapped $15 million in the quarter up 52% over last year.
Here too we anticipate continued strong growth from existing customers, but also from new services that we've launched for gene the antibody solutions the.
The Sanger sequencing business continued to perform particularly well with revenue of $14 million.
This represents 20% increase over the prior year, but I remind you that we had a significant slowdown in sanger during the last weeks of March last year. So it's not as meaningful of comparison, but we reported to you of that in the September quarter, we were back to pre COVID-19 levels and we have since exceeded those levels, including Q2, when Sanger revenue was up 6% from dish.
<unk> quarter and solidly back on a steady growth path.
Rounding out the services business, our sample and repository solutions team turned in a strong $22 million quarter up 24% year over year. When we compare results excluding revenue from our discontinued RUC. Dr. Aligns we demonstrated significant growth in the number of samples and are repositories, especially.
This in Germany, and we expanded our footprint for manufactured product sample management as part of the COVID-19 vaccine rollout.
We are particularly encouraged by the inflow of samples from a large pharmaceutical customer as part of the contract the store a majority of their biological samples.
We registered the first significant tranche of what will ultimately be several million samples coming to us over the coming 18 months or so.
We're encouraged by the level of sample outsourcing activity, that's underway and because of the investments we've made over the past years to be able to manage many disparate types of complex of collections on behalf of our customers. We're well positioned for continued steady growth in Srs.
In the life Sciences products business line, we once again demonstrated very strong growth up 69% year over year to $52 million led mostly by consumables and instruments, but where the welcome contribution for both onsite services and automated stores in early and hopeful indication that we are being allowed more physical presence.
The customer sites after very limited access for most of the past year.
The consumables and instruments delivered another record quarter at $35 million more than double from Q2 last year, we estimate that approximately $14 million of the increase was COVID-19 tailwind, indicating a still very strong 30% growth in C&I ex COVID-19.
As we've mentioned on previous calls we're focused on maintaining the new customers that we've won during the pandemic and are encouraged by our progress to date.
All in the life Sciences business continues to deliver extraordinary revenue growth our unique portfolio of capabilities is positioned to manage and interrogate tens of millions of samples, which are among the most precious assets and our customers' portfolios.
Our ability to rapidly deliver high quality products and services in the form of an integrated sample management solution is proving to be of highly desired capability. We are targeting many organic and inorganic investments to further enhance our value and relevance to customers across the life science of spectrum.
With a $500 million run rate and enviable growth profile and strong opportunity pipeline. The life Sciences team feels ready to set out on its own.
I will now discuss results from the semiconductor business over the past months, we've been hearing about unprecedented long term capital expenditure plans by the world's largest chipmakers investment commitments are not only coming from companies. The government's two we're gearing up to support investments to secure strategic availability of critical semiconductors in no small.
Apart because of geopolitical uncertainty.
The sustained acceleration of myriad technology applications that are fueling investment is driving what we believe will be both strong and sustained investment for at least several years.
Automotive high capacity computing, AI and machine learning and Iot are all drivers of more silicon devices packaged in more mobile ready configurations that are driving tremendous growth across all sectors of the semiconductor market.
What's more we are beginning to witness the startup of a resurgence in the memory chip sector, which will compound the already robust level of foundry and logic spending.
Semiconductor revenue was another record in Q2 at $157 million up 20% from Q1, and 26% year over year in.
And even though this is an extremely strong growth. We believe we're a long way from a peak in performance or expectations.
Our bullishness comes from several indicators.
First forecast for capital investment from the world's largest chipmakers continued to expand to new levels, which are dramatically above any prior periods.
Second our semiconductor bookings in the quarter were a record breaking $286 million.
And once again, even in the remote work environment, where we're not physically with our customers. We delivered a record 50, new design wins up from 39% in Q1 and very much on a record pace this year.
31 were from new system design spite from robots and an impressive 14 in Ccs.
Each of these indicators, especially our design win success is what gives us confidence about our solid position in our market segments and the key technical role, we'll play on our customers' current and future expansion plans the.
The combination of robots and systems revenue from process equipment was $108 million up 19% from Q1 and up 56% year over year.
We see sustained growth in semiconductor equipment automation products again in Q3 with most of the increase coming from our vacuum automation products for front end semiconductor manufacturing.
As we indicated in our Q1 earnings call, we are seeing sustained momentum in the advanced packaging space.
In Q2, we delivered a new record $21 million up 19% sequentially and an increase of more than 60% from Q2 last year.
Most of the revenue comes from existing customers, who are ramping shipments of the designs that we won some time ago and again, we anticipate continued healthy advanced packaging revenue as the applications that drive these technologies continued to become more pervasive.
And we delivered another solid quarter of Ccs revenue at $37 million.
Up 28% from Q1, it's still approximately.
<unk>, 20% below the record reported in Q2 of 2020.
We anticipate a strong second half of our fiscal year, starting with the June quarter, when we expect Ccs revenue to exceed the $45 million Mark.
Most importantly, we added another nine new customers in Q2, continuing to broaden both the number of customers, who are taking our products and adding breadth to the types of device manufacturers that are adopting automated contamination control solutions into their manufacturing processes.
Some of long way from the days when tier one foundry was the primary driver for the Ccs business and our outlook for the growth of this market continues to play out.
As we were in the fall of 2019, we are now entering another period of the new threshold and Ccs revenue. We are once again ramping production capacity to be able to manage these new levels of demand across the new base of customers regions and manufacturing process technologies.
All in the semiconductor business is providing an environment for continued growth and because of the portion of semiconductor equipment capital investment directed to vacuum processes is growing such as with deposition and etch and the demand for more contamination control systems is increasing our market opportunity is growing faster than overall wafer fabrication.
Equipment or.
Of our sustained investments in innovation are allowing us to continue to gain market share, thereby driving our growth rate even higher.
At this.
I'd like to make some introductory comments about our most recent addition to Brooks the acquisition of precise automation of highly capable company the designs and sales collaborative robots.
On that in 2000 and for by Brian Carlisle and Dr. Bruce Shimano, who for decades have been two of the most capable inventor entrepreneur in the automation space. They built the capability for collaborative robots, that's particularly well suited to the side by side human work with of compact form factor and easy to initiate capabilities.
The precise automation brings a strong product and technology portfolio and installed base of more than 3000 robots and an innovative motor drive technologies that will also be beneficial in the next generation of semiconductor automation products the day.
Most of the precise automation applications have been weighted toward lab automation implementations, but their technology is the beginning to be examined for other applications, where the precise form factor is particularly well suited.
Our semiconductor automation business is robust and well positioned.
In addition to capitalizing on our strong semiconductor position. We're now embarking on the next opportunity vector that will allow us to use our expertise in mass to grow into other exciting markets. Most of the same way we did when we launched the life Sciences business out of the semiconductor business and then again, when we acquired Dms to penetrate into the contamination control business.
At this time, we envisioned even broader opportunities that exist in the rapidly growing market for collaborative robotics solutions, our new independent structure will allow Brooks automation, the fully fund and support both the semiconductor business and this next exciting new automation growth vector.
I'll conclude my remarks today as I began them telling you of two great stories of outstanding capability colliding with urgent customer need supported by two tried and tested enthusiastic management teams eager to further accelerate the performance of their businesses.
While we remained together and after we separate we plan to build on our record of value creation by innovation focused investment disciplined deployment of capital and the level of of good challenge. We thank you for your support as we built this company and we're enthusiastic about our exciting journey ahead on.
Now I'll turn the call over to Linda.
Thank you, Steve we will continue through the slide deck transitioning now for the financial results charge for the second fiscal quarter, starting on slide 13.
The light of the announcement I will clarify for everyone that we will continue to reflect the total company results. Just as you are accustomed to seeing them until the separation culminates, which we expect to occur by the end of the calendar year.
As we go through the details you will see that our record revenue of $287 million and 30% year over year growth as well as a record level non-GAAP earnings per share of <unk> 61 in the quarter came from strength on both sides of the business underscoring two strong business models with margin expansion.
And good cash generation.
When you look at a trailing 12 month snapshot of our business. The results are quite impressive as you may have noticed and steeps charge, we crossed over the $1 billion revenue Mark for the past 12 months I would also add debt over the same time period compared to the prior 12 month period, we drove 400 basis points of gross margin.
<unk> 620 basis points of operating margin expansion and we generated over $150 million on operating cash flow moving.
Moving on to Slide 14, let's go into the details.
With revenue up 15% sequentially and 30% year to year, the GAAP earnings per share from continuing operations was 32 of.
Up 20 year over year, but down for sense from the prior quarter.
Before explaining this I'll draw your attention to the same earnings per share of line under the non-GAAP side, which shows 30% increase sequentially.
Call out the primary drivers of the differences here as we step through the GAAP site on the left.
On the gross profit line, we were down 90 basis points quarter to quarter.
Within this result, we absorbed of $5 million charge for tariff liabilities related to time periods prior to this fiscal year.
In the quarter the company reviewed values declared for import tariff purposes on certain shipments made in our gene was business and as a result, we have estimated the larger liabilities to certain jurisdictions and recorded as in this quarter.
The $5 million relates to the for five years prior to this first half.
Because of this portion was related to prior years and was such a significant charge. We excluded this from the current fiscal year non-GAAP results we.
<unk> believes the non-GAAP results, which you see on the right reflect the more clear indication of profit generated from the current business activity and is also a better reflection of what to expect going forward.
With that in mind, we did book $750000 related to such shipments made since the beginning of this fiscal year and appropriately left that impact in the non-GAAP results for the quarter.
On an ongoing basis. This cost has a modest impact of approximately 25 basis points toward of life Sciences business and 10 basis points to the total Brooks business again that impact is in this quarter's non-GAAP margins shown here and those of the life Science gross margins, which you will see later that we're on.
Above 50% again for the third straight quarter.
And the operating expense section on the GAAP side, again, GAAP SG&A increased 21% quarter to quarter.
This line contains $12 million of costs, primarily associated with activities preparing for the separation of the companies and are excluded from the non-GAAP performance results.
These activities include advisers financial support the carve out the financial statements and additional audit and legal costs.
All in the GAAP earnings per share was 32 cents for the quarter up of 158% year over year still showing the significance of the growth and profit leverage of the business.
Let's look to the right site for the non-GAAP results gross margins were 47, 1% expanding 490 basis points year over year, driven by life Sciences and semi each reporting just under 500 basis points of improvement year over year.
The revenue growth and the gross margin expansion drove operating income upward of 124%.
Operating margin was 22% up 850 basis points year over year, and adjusted EBITDA margin was 24, 9% up 910 basis points below.
Below operating income non-GAAP tax rate in the quarter was 27%.
When you combine it all we saw a 145% growth in the non-GAAP earnings per share.
Now please turn to page 15 for the results in our life Sciences business.
The second quarter, our life science business generated revenue of $130 million, an increase of 36% year over year and 10% sequentially.
We estimate that our product business benefited by approximately $14 million from COVID-19 related demand, primarily in our consumables and instruments business of <unk>.
Of this the specific to COVID-19 related research and a portion is driven by meeting demands in the supply constrained industry.
We expect to keep many of these customer relationships going forward and still have difficulty determining just how long the COVID-19 research will continue.
The product business in total was $52 million and drew a significant 69% year over year. In addition to the C&I strength of <unk>.
<unk> was supported with double digit growth of our store systems and product services offerings the law.
Life Science of services business was $77 million and when excluding the impact of unwinding. The alliance grew 28% year over year.
This business is comprised of gene was in our sample repository of service offerings. The.
The <unk> business grew 31% year over year, and accelerated 6% quarter over quarter, driven primarily by continued expansion of synthesis and next generation sequencing.
We saw strength across all business lines.
The sample repository services business, excluding the alliance revenue stream also reported strong growth of 24% year over year.
The growth was led by storage services and informatics.
Now for a gross margin of 55% for the quarter were higher by 460 basis points year over year. As we've described previously we exited our alliance contract with <unk> in the fourth quarter and on the year over year basis. This contributed 180 basis points of favorable mix benefit to our results.
Performance improvement of approximately 280 basis points drove the balance of the gross margin increase.
The life Sciences product business gross margin was 46, 5% of 240 basis point improvement year over year, driven primarily by the strength in the consumables and instruments and the life Science of services business provided 53, 2% gross margin in the quarter up 650 basis points year over year.
<unk> driven by growth in synthesis, which carries above average gross margins improvement in Srs and the mixed benefit of exiting the alliance. The services business includes approximately $3 million of revenue from the two recent acquisitions. The informatics business acquired in February of 2020, and the sample procured.
<unk> services business acquired in December.
In total the Q2 operating margin of 19% expanded roughly 10 five percentage points over the last year I have also provided you with additional adjusted EBITDA in the last 12 months metrics to facilitate your assessments of each business.
As you can see on the segment based results the leverage in the life Sciences business model has brought US two of 22% adjusted EBITDA margin and continued decline in the second quarter.
As we look into the third quarter of 2021, we expect life sciences revenue to be in the range of $128 million to $138 million.
This range supports approximately 37% to 48% growth year over year.
Let's turn now over to the semiconductor business on slide 16.
Semiconductor solutions revenue of $157 million on the quarter increased 26% compared to the second quarter of 2020 and was up 20% sequentially as.
As Steve noted automation products grew 56% year over year.
Within this group of products, the vacuum automation portion, including robots and systems grew 97%.
Revenue in our contamination control business increased 28% sequentially driven by increased shipments, however, still 18% lower year over year, our services revenue was up 14% year over year.
Semiconductor operating margins for 'twenty, one, 2% of 780 basis points year over year, and up 480 basis points sequentially.
Gross margins were strong at 44, 4% up 490 basis points compared with last year, driven by improved cost absorption and also helped by the favorable mix of our higher margin vacuum automation.
Again, we have provided you with additional adjusted EBITDA on LTM metrics for your assessments of the business.
On the segment based reporting the semiconductor business also shows a 22% adjusted EBITDA margin for the last 12 months.
As we look toward our third fiscal quarter of 2021, we expect semiconductor revenue to be in the range of $172 million to $182 million, including approximately $3 million of revenue from our recent acquisition precise automation. This guidance reflects expansion of 15% to $25 million sequentially.
And supports the year over year growth of 35% to 43%.
Let's turn now to slide 17 for the summary of cash flow for the quarter.
Operating cash flow on the first quarter was $34 million the profit leverage to drive higher EBITDA with the growth of the business is evident in its converting to cash flow, while making needed investments in working capital for growth.
Over the past year, we have generated operating cash flow of $156 million on a trailing 12 month basis, we used approximately $10 million for capex this quarter, including $2 million for the gene was China building projects, we paid $7 million of dividends to shareholders on the quarter.
Let's turn to slide 18 for a quick view of the balance sheet.
At the end of the first quarter, we had $334 million of cash restricted cash and marketable securities an increase of $12 million.
With that stable at $50 million, we finished the quarter with $284 million of net cash flow.
Sequentially the quarter end, we acquired precise automation and used approximately $70 million of this cash balance.
Let's turn to slide 19 for our guidance on the third fiscal quarter of 2021 revenue is expected to be in the range of $300 million to $320 million with semiconductor revenue expected to be in the range of 172 to 182 million of life Science revenue is expected to be 128 to one of.
Third $38 million.
Non-GAAP earnings per share is expected to be 65 to 75 per share and the GAAP earnings per share is expected to be 46 to 56 for the full year. We now expect capital expenditures of $65 million to $70 million and the non-GAAP tax rate to be in the range of 20% to 22%.
You do the math on the anticipated trailing 12 months results at the midpoint of Q3 guidance. The business is expected to have generated $1 1 billion of revenue and $2 25 of non-GAAP earnings per share, which puts us already on top of our 2022 objective well ahead of.
Of our previously provided three year target model before.
Before we conclude our prepared remarks I'd like to return to the subject of the separation of the two businesses on slide 20.
Think this may address some anticipated questions the <unk>.
<unk> is indeed expected to drive significant value to the two businesses as the multitude of growth opportunities that become significant enough on both sides that are dedicated management team and company structure will serve each business really well.
We plan to execute the separation in the tax efficient manner for shareholders and the preparations are well underway, we expect to complete the separation by the end of the calendar year.
Each business will launch with a strong balance sheet affording ample capacity to pursue the additional growth vectors Steve outlined.
In creating two standalone public traded companies there will be an impact to the corporate SG&A cost basis for each of the businesses we.
We anticipate adding approximately $15 million of annual ongoing G&A structure for the total G&A to standup the two companies separately.
Additionally, it is important to highlight we have historically allocated corporate G&A costs to each segment proportional to revenue, which has meant that in the past a greater proportion of Brooks G&A cost was carried in the semiconductor segment.
Following the separation as we pull apart the unique support structures of each of the semiconductor business will assume its unique structure and the life science its own structure we.
We anticipate that the semiconductor business will on a total annual basis of approximately $10 million less G&A in its P&L and the life Sciences business, which addresses the much larger customer set and more varied offerings will have approximately $25 million additional G&A costs in its P&L.
Compared to the amount of charging to its current segment reported results. These estimates again include the extra G&A structure for separation.
When you tie this to revenue, we see the new semiconductor automation business profit margins being lifted by nearly two points due to the lighter G&A and the life Sciences business, having a little more than five points of added pressure the profit margins when for separated.
We expect with the projected growth of the life Sciences business will pass through the adjusted EBITDA margins. We saw on the latest trailing 12 months picture by the end of 2022.
We plan to hold an investor day for each business in the fall as we approach the separation of effective date, and we will provide a more complete update with clarity to each business you can expect to see a new long term model for each business for now we will stop talking about the 2022 objectives as it is clear we are exceeding those objectives in this current year.
Sure.
That seems like an excellent point to finish on and so I will turn the call back over to the operator to take your questions.
Thank you.
I'd like to register a question. Please press the one followed by the for on your telephone you will hear of three tone prompt that acknowledges the request for your question has been answered and you would like the withdraw your registration. Please press. The one followed by the three so again for questions. It's a one for one moment. Please for the first question.
First question is from David Saxon with Needham. Please go ahead.
Hi, good afternoon, very exciting news.
This afternoon I guess.
First just on the split.
You kind of lay out some some points from the slides, but can you talk a little bit more specifically about how you plan to kind of augment the strategy on specific to the life Sciences business.
And if you think you can following the split.
If revenue growth and margins could be above what the would've been.
If you kept.
At the combined company and then I have just one follow up.
Hey, David it's great to have you on our call with Us and we appreciate you picking up coverage this quarter the.
Let me comment first and then I'll have Steve chime in one.
We have maintained over recent years.
Grew both businesses that we haven't sacrificed the investments to date in either business.
And I think it's fair to say.
We wouldn't look to the past year of past two years and say Gee, we could've done better because we think we have delta dealt with it in an unconstrained.
We didn't make tradeoffs between the two as of yet we're at a point now where the strategy in the life Sciences and the strategy in the semiconductor business could certainly as you in your words has augmentation of ore and our words has additional growth vectors to exercise and so those that Steve outlined.
In the life Sciences space, certainly take us to the sample base service area, including.
The focus on aggregating sample data, helping to service customers perhaps.
In that realm, and and certainly the the acceleration in science advances of viral vectors of etc point to a lot of service offerings.
<unk>.
I will say expansion of value that we can provide for the customer base.
The separation itself does that slow us down at all if anything it provides the concentrated focus.
And capability to move forward in that space, whether it be organic or inorganic and we'll have the management team.
Purely focused on the so we don't think the separation of effects of that opportunity.
And in fact, we think this junctures timed just right because if we were trying to move forward, let's say two more years, we may start seeing things start to compete with each other in terms of attention and focus but right now what we think in this.
Coming timeframe is good timing.
And David Hi, This is Steve we're confident that with the rapid with too rapidly growing businesses, good cash generating capability and our strategic roadmap is one that we can satisfy so we're really enthusiastic about the future. We think the separation of allows both companies to go even at a faster pace in <unk>.
Of growth.
I will say from the standpoint of inorganic and.
Organic investments just the innovation that we have in our own pipeline, where we have two groups that are really enthusiastic about what the future looks like.
Okay. Thanks for that that's very helpful. And then my second question is just on <unk>.
I mean, it sounds like Ngls and synthesis are seeing some very strong demand.
And as you noted.
Starting to lap some easier comps.
But just given the demand in Ngls and synthesis, how should we think about growth.
In the back half.
And then just given that these are you know carry favorable margins.
How would that kind of plays out in the gross margin. Thanks, so much and congrats on the quarter on the news.
Thanks, David so on the on the growth path.
Pretty fast turn business. So we don't have a lot of visibility beyond where we are but what we find is the more business that we win the more that we satisfy and of high quality timely fashion, we get repeats from those customers.
And we actually did add.
Hundreds of customers again this quarter. So we're really confident about the current position on the capability and Youll see that over the past couple of years, we've made a significant amount of investments in lab capacity and capability, we've been hiring some really skilled.
Employees to help us continue to satisfy the demand. So we feel really good about the continued growth in N GSM synthesis and singer actually but the opportunities that exist in synthesis and Ngls are more significant than as long as we're staying in front of it we anticipate the business will keep coming at the at the rates that we've seen so far.
David I'll pick up on the margin question and it's a good opportunity for me to interject. Some thoughts here on the guidance going into the Q3 and the way we won't comment on the full year, so much but I wouldnt expect things to change.
Significantly but interestingly.
Start with the services business, where you where you where the services gross margins.
Being really good stability.
Going into the third quarter and so it could be approximately flat could be a little bit on positive in fact on a projection in.
In the.
Product business, we actually see stability as well as we do in the semi business on the other side and it's all added up.
The I think the underscoring.
Description as we're seeing stability in gross margin structure as we go from Q2 to Q3 overall.
That's that's what's inherent in our guidance equation.
Great. Thank you.
Thanks, David.
So again for questions you can press the one followed by the for on your Keypad. Our next question is from Patrick Ho with Stifel. Please go ahead.
Thank you very much on and also congratulations on the announcements and the.
It sounds like a really exciting.
Way to extract value for all Brooks shareholders. So congrats on that.
Steve since I only have you for few more quarters on the semiconductor side of things, maybe I'll start off with debt on that business and you talked about the growth in the contamination control business and also in terms of the new opportunity you've talked about memory in the past would it be fair to characterize some of the emerging opportunity coming more from the.
DRAM given the challenges and the new manufacturing processes that are going on of DRAM that require higher levels of contamination control.
Yeah, Patrick Indeed, I think probably the last quarter in the current quarter for sure of the order patterns.
As the first meaningful slug, if you will in memory applications. So we are starting to see that.
Some of the design wins, we referenced are for.
DRAM and for memory applications. So we don't know where it goes but we had anticipated that the.
Growth would begin more meaningfully it wont be still like tier one foundry, but the.
The density of tools in the DRAM fab has begun and indeed, we're starting to see it.
Great and as my follow up question on the Life Sciences, Ed you talked about strong growth from both existing as well as <unk>.
New customers on the services side of the yen, which includes the <unk> business would it be fair to say that the strength of at least near term is coming for more existing customers and that the new customer traction.
<unk> is still forthcoming or was it balanced.
More so this past quarter on going forward.
So Patrick the majority of the business always comes from existing customers, we usually get a toe hold and we start with customers and the end of the business builds overtime. So when we talk about new customer wins, those are really important to us but quarter after quarter those become more meaningful so we treat them as equally important.
So when we win new customers. They are precious because they are the ones who turned out to be really significant customers in six or eight quarters, but the majority of the business from existing customers and the balance has been great. So far and the fact that the gene with team brought to our thousands of customers, it's really expanded the touch points.
The number of offerings that we can bring in.
And the putting the services business together with the gene with an Srs together under Amy has started to generate some meaningful synergies and so we're taking full advantage of customer capture to share some of the the offerings across.
Across the Srs and the gene with space.
Great. Thank you again.
Thanks, Patrick.
Our next question is from Jacob Johnson with Stephens and your line is open.
Hey, good afternoon, and I'll add my congrats as well.
And I'll ask another question on gene with.
Can you just I mean.
Jean was posting really strong growth maybe asking this a different way can you just talk about what end markets or customer types are driving the demand youre seeing in Ngls and synthesis I mean, how much of this is biopharma versus academic.
And maybe any comments about how this has or has not shifted over the last couple of years.
Yes, so jacob bits of.
Tough one to answer because we do have thousands of customers. So the mix the mix isn't moving appreciably, but what I will tell you is.
In the earliest days of COVID-19, we saw a pretty significant shift from existing customers into.
The research on the.
On the on the virus and then as we continue to work on on synthesis and on testing we saw it move more toward the vaccine development, but these are because it's the customers the shifted their work in the research activity. So the same customers different activities.
<unk>.
Were particularly strong in the academic space in the research space and we haven't seen any changes there in the again the customer capture remains really strong so in terms of mix, it's not appreciably different.
From a customer standpoint, but the kinds of work that we've done have shifted with the necessity of the of the shift in the research.
Got it thanks for that Steve and then I guess my other question, we've seen some other companies getting into the freezer product business can you, maybe just remind us the competitive advantage of your on site freezers.
There is largely around automation and then.
And maybe talk about the near term demand trends youre seeing for that business have you seen any.
As we reopened yet and then maybe also just touch on the longer term demand for freezers, given what's going on in in cell and gene therapy and.
<unk>.
Sure.
Youre exactly right there on.
There are a lot of freezer companies and a lot of freezer capacity a lot of ways to get a sample of coal. We're really believed that the automation that's tremendous value. We think the fidelity of the sample is critical the history of it the <unk>.
Evidence of the sample how many times its been removed did it ever thought we think those are are critical to the samples and the longer samples are held the more of the history is important and it is just impossible to do with hundreds of thousands of freezers that are out there and installed base and I think what people are finding is the the Rex.
<unk> of the of that capability are proving to be essential in terms of the value of the sample. So indeed.
A lot of there's a lot of freezer demand.
And we continue to believe that the automation is a critical part of our customers believe that too and I think that's what's helping us to continue to drive the business. So that's the debt.
That's particularly important to us.
And we have an entire range actually from room temperature automated samples just from the automation standpoint for the simple handling and location as you know all the way down through.
The cryogenic temperatures that minus the 190 degrees C and again automation for non trivial capability, but it's an essential part and in the value of a sample.
Got it thanks, Steve Thanks for taking the questions and congrats again.
Thanks Jacob.
Our next question is from Craig Ellis with B Riley. Please go ahead.
Yes, thanks for taking the question and kind of start I'll Echo the congratulations guys to the the long term evolution of the business and the juncture you're at now wear.
Semi on life Sciences can spin out and no offense to you guys suite of love happened the around but it'll be great to hear from day, one day, a quarterly as well.
So.
The first question I wanted to ask Steve can you just go into a little bit more detail on the point you made about semi.
Bookings and design win activity, so very very robust bookings of $286 million and then the sanguine. It's very strong on the semi side are you starting to see more quarter pipelining and is that contributing to the ryzen bookings for are we just at a point where the half on half inflection that's coming in.
The business is going to be.
Just just exceptionally powerful here.
Craig it's tough to call, but for us it feels like we're we're really going to ride of powerful wave here the.
The bookings were really strong they haven't subsided so much come.
Coming into the quarter here.
The.
The requests of all of our customers about making sure that we have adequate capacity continue to roll in.
We do have concerns generally about the capability of the supply base, even though we've been able to keep up without any issues, but if the kinds of requests that are being put on to the industry.
The persist in the growth continues ultimately it'll creek, a little bit here over the coming.
Over the coming quarters, but the demand is robust it's from a really broad base. We're just now seeing memory pickup which is adding to an already strong foundry and logic.
The environment and again.
Craig as you know really well.
We have not just north American Oems as our customers were.
We're a seller of capability around the world, we have a lot of Asian equipment makers, who are gaining share in Asia and it continues to drive our business for the footprint in the global presence. We have continues the sustain us.
Above what might the might be reported by some U S publicly traded companies.
Okay got it that's real helpful and.
On one of the points that you made in prepared remarks on Ccs.
I think we've expected that there would be coming on collection from memory in Ccs and we've certainly seen some advance node DRAM projects announced in and those using U B S.
As we look ahead and as we book inside some of the bookings activity are you starting to see increased ccs activity within memory sticks.
We are we're starting to see we're starting to see memory add on to the the growth of the breadth of the business that we have.
I mentioned in the prepared remarks.
In the fall of 2019, where we're working to get our.
The factory capacity up in a pretty fast ramp to a new level and we're at that again.
Making sure that we have adequate capacity because we see we see another.
Another high watermark coming for Ccs on a lot of that is fueled by this expansion beyond just the the foundry, but also into memory now.
Helpful. And then Lindon for you helpful color just on the gross margin characterization stability makes sense, although I might argue that volume in both businesses could suggest.
It may be something that would be up sequentially. So maybe you can touch on why that would be the case, but but the real question is on the intermediate term view of per life Sciences. I think we just put up our third consecutive quarter of 50% or better gross margins. So are we know the.
Where we're at a time, where you think 50% is just really of sustainable number for that business.
Yes, both good questions. So first on the sequential Youre right in the ramp we generally do see momentum with revenue and the gross margin line here is the difference.
The coming quarter on this guidance more of our upside we're not slipping away and our manufactured product, but more of our upside is in Ccs on the sequential guide and it's a product that we manufacture with the help of an outsource partner.
And so it will be certainly nice incremental revenue at the gross margins of that structure, but it doesn't contribute further to the absorption that we've seen in the benefit of the last two quarters of the ramp. So we're at we're at a good stable point on the manufacturing ramp internally.
Were positions that we could do more but right now our guidance contemplates more stability on our manufactured product and more growth on our outsourced product.
Thats why youre not seeing quite as much as you might expect in this kind of ramp.
Going forward.
That doesn't mean that we wouldn't see it towards the end of the year or into the <unk>.
Into next year, because I think the robustness.
Is there for the business continue to expand I will.
A highlight the we're very.
Focused on ensuring capacity in the semi manufacturing space in house as well as in our partner but in house.
Both space wise on resource wise to make sure that we can ramp going forward and that and certainly your your question would.
Convey in the later quarters.
On the life Sciences question the intermediate term.
So the 50% is something that.
I don't want to say that we wouldn't expect it going forward, we think that it's probably going to be centered.
And the 49% of 50 and 55% range.
We keep this latitude and I've been saying it could be done on 47 48, I think it's fair to I think it's probably 49% to 50 in that range.
<unk>.
Okay.
There is the point we will.
You need to invest in capacity capacity on the life Sciences site means space as you know we will bring the China building on online later in the year during that time, we will have a transition where we're using space on the owned building we'll have space on the lease space. So so we will take.
On just a little more cost during that timeframe and and as we expand space. Sometimes of ahead of our capacity you'll start to see the utilization of cost dropped a little bit and then certainly we invest resources at a pace to stay ahead of demand so I'm not.
I don't want anybody to be confused I'm, not calling for softness in margin, but I'm, calling for a fair latitude in.
48% to 52.
I think we could see it go either direction book, but your ear nudge after three quarters in a row at 50 on AR.
Percentage is a fair one.
To think that we could sustain.
I guess theres, one more attribute to.
And.
The COVID-19 the COVID-19.
Demand of consumables and instruments is favorable to our margin mix as well.
So we highlighted about 14 million of.
<unk>.
Of what we would say was additional demand in the quarter portion of it related to research and COVID-19 applications.
But.
But a portion of also in the constraints of.
The capacity in the industry.
Despite demand that we're picking up certainly we think that will keep and maintain many of those customers, but C&I work to see any softness then that would be of a modest mix downward. So another reason why you may see this dip below 50%.
That's helpful perspective, and the guidance once again congratulations on the milestone today really significant thank you.
Thanks, Greg.
Next question is from Paul Knight with Keybanc. Please go ahead.
Hey, guys.
Steve could you talk to the sides of the improved financial performance of the life Science one of half under what did you see the markets. It said, it's time to do the spin.
So Paul a couple of things one we had.
As you remember it took us a while to get to of cash generating position in life Sciences, and we've been there for better part of almost two years the.
The size is pretty significant and the.
Amount of investment that we need to make to stay in front of the opportunity we think those of.
Those are of short cycle decisions were pretty aggressive about expanding capacity and capability and the team has really.
Demonstrated that there.
They are able to capture everything that they that we invest in so that's been that's been pretty significant.
At the same time, we have of semi business that has its own trajectory on its own investment patterns and when we looked at it we looked at the balanced opportunity here to stand up to companies and make sure. They didn't compete for capital. We think it will we think it'll keep them both on really significant growth paths and if anything allow us to both accelerate by having.
By not sharing of balance sheet actually by each having their own independent balance sheet, so size scale and overall capability of the life Sciences business. That's now running at a $500 million run rate. We think made this a really right time for us to stay on that business up.
It does look like the industry of clearly doing more M&A in life Science do you hold that view.
I think so we believe the pipeline is good there are a lot of a lot of good opportunities on a lot of good growth potential both for the organic investments that we're making but certainly from an M&A standpoint.
Okay and then.
You had mentioned in the call that you add on.
Major biopharma customer I understand that you've done on Lilly in the past as this customer on incremental new one in terms of our sample management.
And as we talked about.
When we had a quarter ago of the sample started to come in now. So this is a brand new customer for us and it's a really significant one I think you'll remember at the analyst day, we had in September of 2019, we talked about doubling down and looking for more large customers.
Who would give us considerably more of their business and the trust samples to us.
And it turns out this customer is not only given the samples to manage we also had pretty significant large store automated store wins to manage their their chemical compound collections as well and the the magnitude of that win was even more significant and that's a couple of years project that we're about halfway through right now so it's of it.
A major win for this large pharmaceutical company all the way around.
Illogical samples are heading into the Indianapolis in Greece, and the large automated store to there.
One of their central research sites.
Okay and then on.
When does the China gene with facility come online.
Yes.
It should be online by end of the calendar year.
<unk>.
Yes, so we have.
Overlap with the other buildings into the beginning of the next calendar year to ensure a timely transition.
Okay. Thanks.
Yes.
Yeah.
Next question is from John Pitzer with Credit Suisse. Please go ahead.
Yes. Good afternoon, guys. Thanks for let me ask the question I'll add my congratulations Steve Ive got a couple of questions on the semi business and then a couple of on the life Science just on the semi business. When you look into the fiscal third quarter and the guidance you are giving.
Is there a sense that you can give us as to what wf fee level that equates to is that sort of of $75 billion level is it an $80 billion level. How are you viewing that and certainly not for this year, but especially as you think about sort of government involvement and the desire to regionalize capacity can you help me better understand.
Kind of what portion of your semi business is tied to new fab builds versus sort of the equipment installation because clearly I think on some of your automation products you should benefit of a little bit earlier, how do we think about brick and mortar versus WSB within your semi mix.
So John you buy a lot of.
Questions. There. So the first one it would be hard for us to imagine that it's how to pick the W of fee number but it sure feels like it will be consistent with the.
With the 75 billion ish level.
Paired to the order patterns that we've seen in the past and the best metric for us is simply.
<unk> count if you will for some.
Oems and so when we compare run rate one year to run the way. The next we'd say, it's pretty consistent with the $75 billion spend but I couldnt put too much precision around that but we'd say that's consistent.
In terms of the.
Brick and mortar and the tool counts most everything that we shipped the relates to capacity of there's no question about it but as you know the fabs are generally the brick and mortar it's put up and then the fabs are populated in phases.
So at the Youre right some of the contamination control tools go in a little bit earlier, but.
The the entire fab isn't filled with contamination control, but it does go in a little bit earlier.
Probably similar to the metrology tools that go into a factory but.
We see steady build out so when there is a.
Our large fab built and it gets populated in phases, we see that for the direct to fab.
Contamination control systems that go in but if there's a if there's a difference it might be a lag of a quarter.
But probably not more and then steadily all of the automation capabilities will provide the Oems. They go in as those as those process tools go and John the same thing often will ship and recognize revenue say for.
A robot or for of vacuum system that the OEM will recognize as revenue maybe a quarter. Later. So indeed revenue has probably always just a little bit of in advance of what you'd see from a large OEM shipping product to those same fabs.
That's helpful on the life Sciences side the <unk>.
Midpoint of your guidance is up sequentially, but the range includes the down is that a reflection of seasonality in the business is it a reflection of some caution of not knowing whether or not COVID-19 was a headwind for.
Tailwind to the business and then as a follow up on the life Sciences Linden. When you think about the Opex you want to add there is the plan that that gets added before the split.
And if it does is it sort of the linear AD between now and year end.
Yes, I'll try to take both questions here.
First you know we range around the life Sciences on both revenue because we see operating.
That there is potential as you said the softness in terms of what windows of COVID-19 drop or not.
How much does that affect us.
Also you know if the COVID-19 spikes in particular territories and things closed down again.
Those are unheard of.
Options, either so we do put a range around this week.
We have a pretty good history of striking at the midpoint, but but but there's a range around everything here on.
On the.
The opex.
We said, we would add about $15 million of additional structured to both companies.
Theres a portion of this that doesn't become effective until it's separated let me highlight.
We will be adding.
On some governance.
That includes for audit fees things of that nature would start with the start of the company not not.
Ahead of time, but for some aspects of that.
We'll start that we start building and as you've seen we've already.
Worked on the financial parts of the carve outs et cetera, but certainly we will be hiring some resources to stand up to the companies I wouldn't call. It exactly exactly linear we're going to.
But it might be a good assumption on your part.
But.
But I would say probably more.
As we get into the September quarter of less than the in the June quarter.
Thanks very helpful. Appreciate it congratulations.
Thanks, John I appreciate the attention that you gave us.
And our last question is a follow up from Craig Ellis with B Riley. Please go ahead.
Yes, thanks for taking the follow up just a quick clarification on that last comment Linda So I thought in the prepared remarks, you said you would add 15 million and then I thought I heard in response to John's question. You said, you would add $15 million for both companies. So is it that there's $15 million of expense currently in the model for corporate.
Spencers and.
And that stays with either of life sciences, or semi and Theres $15 million that's out of doors it really.
$15 million debt is added for both companies so $30 million in total.
It's just $1 $15 million so okay.
Okay. So thanks for clarifying figure I appreciate it so from our current run rate of course, we will be adding.
The investment at a modest level as we always do but operationally but.
But in terms of standing up the two companies separately, it's just one additional slice of $15 million.
And I gave a few examples there's infrastructure.
Public officers things like the and the company. So I think everybody will understand the.
And.
But just one just one and in the prepared remarks I gave I think.
Info if you were to take the trailing 12 month data on each segment page of the results, which I gave the trailing 12 months of information I tried to surface.
Analysts and investors here, giving you some of the Starwood and then point to the re allocation dynamics versus what would happen. If we pulled out of park. So you kind of play that back to that and get a good feel for where the starting point might be.
That makes sense.
You bet. Thanks, Craig.
We have no further questions from the phones.
Alright.
Look this.
These are so exciting times and energizing for our Brooks team mates.
Got it.
It comes with an exciting market both on the life Sciences and on the semi markets, it's particularly exciting for us to see Dave <unk> zinc is the featuring Tony named <unk>.
Anticipating taking on the leadership of another public company for us So those are internal rewarding.
Time periods for us, but when they come back to the earnings. If you just think about what we've talked about we're guiding of Q3 that in our range is expected to grow 35% to 45% year over year.
At the end of the quarter at the midpoint of the guidance, we will claim of we'd have.
Exceeded.
Our met or exceeded the business model that we set up to do in 2022 of more than a year ahead of time.
The.
The strength of both the industries are really really strong the growth trajectories of the capabilities of the teammates.
<unk>.
Are equal and capable of the match up to the strength of those markets.
And we just think of it really makes.
The good strategic sense. This has been a thoughtful process months in the making of.
Years in the making of the transformation, but months of work on behalf of our teammates to be ready for today and and to be ready by later this year to culminate the separation, but it's a clear growth path for each business and their individual industries.
Well positioned strategically operationally and and I think as you can see financially both on the balance sheet as well as on the.
The leverage profit model.
For growth so it's just.
It's exciting times for US we look forward to seeing you during the quarter, we will be at multiple investor conferences in the quarter and we anticipate a lot of good dialogue off of the <unk>.
Announcements today, and we look forward to seeing at the same time next at the end of next quarter. Thank you very much for tuning in with us.
And that does conclude our conference call for today, we thank everyone for participating on you may now disconnect.
Okay.
For.
[music].
Yes.
[music].
Okay.
The test.
Okay.
Okay.
Of course.
Yes.
The.
[music].
Good day.
Yes.
Sure.
Sure.
Yes.
Okay.
[music].
Okay.
So for.
Thank you for.
On.
And the third.
Uh huh.