MKSI - Earnings call transcript Q2 2019

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Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter 2019 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded.

I would now like to introduce your host for today's call, Mr. Seth Bagshaw, Senior Vice President and Chief Financial Officer.

You may begin.

Seth Bagshaw

you. Thank everyone. morning, Good Senior and Bagshaw, Financial Vice Seth Chief President Officer. I'm Colella, this President Executive Officer. morning joined our and by Operating our I'm Lee, Jerry Chief John Officer; Chief and earnings call. our joining for you Thank conference

we released XXXX. Yesterday, after market our results quarter for financial of second closed,

results pro forma website, posted our market been revenue as scheduled financial by www.mksinst.com. to Our have

including for differ report prospects date should the company's those not subsequent the most company various forward-looking statements. to XX-K views comprise As various about obligation remarks MKS press the of yesterday's expectations a and in recent upon statements result relied or future today results discussed representing today, update as for materially and may of company. the any release these reminder, important our statements. a factors, be company's expectations, disclaims These any on plans and in as Actual only and Form to of represent estimates as as end

includes measures. adjusted also release. Today's financial earnings GAAP Reconciliations measures contained yesterday's call non-GAAP are in to

the refer Industries to Scientific with quarter acquisition at measures the certain had on beginning forma XXXX. X, pro Electro occurred the of we which of XXXX, or of February ESI, Inc., addition, closed first In

over Jerry. call the turn I'll Now, to

Gerald Colella

thank Thanks, us you Seth. everyone, Good today. morning, and joining for

questions. strategy, before I'll your call several to quarter XXXX over John start quarter business and second then up and our we third with by supplemented turn our details open the financial markets, information the call on who'll our results XXXX and on and followed customers for guidance, by for the results additional I'll market additional highlights, share

was saw ban. devices, the and we and our per highlighted Huawei within or primarily earnings GAAP quarter the quarter to is were due trade midpoint second $XX.X Markets in which global revenue tariffs our softening for was consumer disruption In $X.XX our range. the electronic guidance of Non was above Advanced of this quarter, environment net Second million, $XXX second million share headwinds the guidance. by which

indirectly this be in markets directly many We see customers as of and impact continues both to China our for other across regions worldwide. and the an overhang our in uncertainty

We to our quarter. Advanced third into headwinds Markets the expect continue impact these

very our though, Markets are achieved report that $XXX revenue of these in record Despite pleased the and new quarter. quarterly headwinds to comprised we Advanced our on a million revenue XX%

We see mentioned stabilized as do uncertain. have and last semiconductor capital quarter recovery a moderation market business appears from still spending we remaining bit to our returning

manage cycles. the financial is and One to of to through years business focusing strategy which a The stewardship. is the of been MKS underlying business all strengths operational has process on approach of the aspects our disciplined

refine any on expenses. to address this manage operating continuously us approach us enables Managing with our short-term opportunities. to business well We adapt fluctuations and to future as model positions quickly

we are that committed we'll to However, for our so also in ready in investments recovery maintaining be XXXX segments key beyond. and growth the

disciplined organic years acquisition to value growth acquisition M&A. capital integral strategy be very Market a for successful our we execution ESI the We've Our the for will significant with creation been and our Advanced will strategy strong the deployment funding generating emphasis many towards come. with of part growth and anticipate have an

semiconductor some key will market. wanted and give We solutions John design introducing wins more quarter I for key understand the lead position a success. you highlight win design our significant power ongoing innovative that our solutions us the importance to to of so of for business second wins in they details

this important were frequency. edge] we In new win into megahertz XX.XX at a the third tool recent significant quarter, designed which the [conductor is at

our critical leadership solutions our in high We growth continue business invest power expanding applications. enabling and to

the after significant Historically, semiconductor have outperformed and positive growth consistently cycle rates. turns growth we Market down a experienced and MKS Advanced

XXXX, to versus grew X.X%. two XXXX year with WFE at a the more XX% CAGR of rate the our during MKS times the at example than semiconductor WFE of rate business For

perspective from market And the five of Market’s grew at Advanced CAGR growth XX% and same X%. we during year versus a period

our at growth that in grown over non-GAAP XX% over twice our period year or of EPS CAGR rate addition, In has the revenue. five

our to revenue estimate earnings to and guidance, the in Turning we XXXX third million $XXX range from million. that quarter could QX sales $XXX

$X.XX share could the quarter net in non-GAAP of quarter remarks. third balance Seth Third per $X.XX earnings will his to per range provide from guidance share.

to to like over At the turn this John. point, I call

John Lee

Jerry. Thanks

in Broadly drive for the last problems economy. the semiconductor primarily five address from and information we component most manufacturing delivers years the to transformed the solutions have processes. economy equipment our Over that MKS solutions supplier advanced challenging company that a markets tech

such economy INSED is developed communications growth the and T&A with are inflection as as build increasing information market within made. storage, how V-NAND major computation of the these and around bandwidth. challenges has data vertical such chips To paths semiconductor address structures a industry The

atomic aspect and control processing. ratio increase require high steps, etch power, deposition increased requiring feature features layer Vertical include

The design RF application. V-NAND second for networks. matching silicon win power custom requires generators business memory multiple our and a etch our secured solution on we chamber tool conductor in quarter a Each a new XX.XX megahertz

solutions this from performance to the award in group partner from was Group leading capabilities, region business our Based Technology support took our OEM. our based a We technical competitor. excellence also China and on strong NAURA power honored

semiconductor design of the measurement deposition in number wins valve ozone pressure a and for had solutions. atomic for our applications direct layer flow also We generators,

the has PCBs. bandwidth increasing from the the To information interconnect density high invest flexible industry communication and economy adopted challenges

We with for complete see progress testing. processing micro us to excellent ESI components and markets with solutions acquisition our these which laser enabled continue to system address

our we flexible order customers quarter, solution This pulse shipped see incorporates new order laser order will drilling multisystem which laser. in for the already spectra-physics our first nanosecond Europe in PCB compliments Asia. second the to In

partner leading Technologies We Ding HDI PCB a from ZDT excellent an awards quality and a supplier. also strategic received or flexible Zhen

is system a ground design We is based purpose This making that solution. progress introduced for we're are HDI smaller pleased throughput, and with specifically higher drilling our HDI/PCB on built newly the laser up processing. a footprint platform with via

We tools centers and application first China. into data shipped have our in the Japan regional Taiwan,

at as semiconductors of to significant costs. they chemicals long-term green excellent include a and that cells, serve to set continue industrial [Indiscernible] applications chemical and produces to MKS. the use to dangerous laser-based and cleaning applications solar batteries, manufacturing. slay growth in ozone opportunities an manufactured be economies more has of efficiency efficiently improve Examples Ozone use proven disposal chemical alternative

ozone OLED for cleaning a display quarter, been as application, systems lithography, our for and this selected our with has photomask to solution the generation MKS cleaning customers. continue advanced second in In was application. dissolved key traction gain leader area an well as ozone

leading our solar we is versatility laser of and displays. a watt in high quarter second cell, Turning laser business new new laser the second XX This to ownership. IceFyre laser cost manufacture with advanced many batteries industry power introduced eco and of applications addresses the solution performance, UV in which

MKS about because depth bullish cultivated exposure to very portfolio technical multiple our remain over the markets, customer We years strength future of our of relationships and high growth technology our collaboration. of and innovative

At this to point, over I like to turn the Seth. call

Seth Bagshaw

and XXXX our cover Thank QX our you, John and QX XXXX discuss guidance. financial I’ll results

market has midpoint quarter first quarter. of of $XXX Sales the sector cause long X% was the compared left as to seven in under expected. Revenue our slightly increase million, QX guidance sequentially an second

in our by costs well the as latter which advanced the quarter, impacted Jones uncertainty tension. In the addition slowdown by market as global trade industrial occurred markets

sequentially semiconductor advanced in an XX% goal sales $XXX were to balanced were increase mix. semiconductor of XX% million, customers of of full advanced due a million Sales a markets were customers our This market. impact or for the our achieving ESI was in Sales decrease market X% $XXX X% quarters of sequentially. markets customers acquisition. for were record long-term

volume was on and continued due expenses to product this midpoint our were cost favorable our was which was the million, million our Non-GAAP gross expectations the controls. Non-GAAP margin mix to of focus cost strong at guidance $XXX structure. XX% managing which to above $X due revenue operating

operating Non-GAAP ability which phase of performance through our guidance A was strong points of to manage was the margin the future mid-point reflects effectively all range. to cycle. XXX operating our the favorable basis XX%, company

million impact included $X.X charges. million operating restructuring in $X.X of million of was purchase XX.X% $XX.X and assets, in margin inventory were million integration amortization intangible gross expenses GAAP included costs. in acquisition $X.X GAAP $XXX costs, million, the accounting of

interest and million. non-GAAP $XX.X million, was interest $XX.X was net expense net expense GAAP

were rate Our or GAAP our than GAAP income. was expectations rate diluted tax geographic the earnings per diluted $X.XX of $XX.X XX%, $X.XX million higher million and through were and mix was Tax share. or share was $XX.X rate non-GAAP net non-GAAP per income XX%. tax net

The integration of cost acquisition almost quarter proceed $X the million exceeding second very continues annualized to of synergies. well ESI

the XX transaction million realize are announced total synergies target subsequent to We in months $XX closing. to on XX to a

and of million synergies revenue division In favorable volume the at for our due was of non-GAAP margin XX% sales solutions cost quarter of $XX ahead approximately equipment expectations mix product was operating and and realization schedule. the the to ahead second

Now the and sheet. turning prepayment $XX and term completed June balance June, In a loan $XXX million at million. we our still on are voluntary down to XX

to origination voluntary since lower sheet, loan our This the delever continues prepayment goal is balance costs. Our recent interest most in ninth XXXX. April

and capacity under of one modest $XXX and maintained ratio incremental times. XX-month million end strong million a the trailing borrowing balance cash of of sheet of an net line the investments, a liquidity quarter, leverage $XXX At we of credit, asset-based under

of and XXXX. which increased million $XX for cash X. flow of Free flow first costs $XX through in cash quarter closed February million in quarter Free the on the quarter first acquisition ESI sales the payments the was [indiscernible]

cash a We In approach we deployment. a per $XX.X paid of continue $X.XX to demonstrate or the million to share. capital balanced quarter, dividend

quarter. of days days were the XX capital, a the to second of XX consistent compared working outstanding of quarter first a end the forma on pro terms with the times turns at first on the pro basis forma In quarter end sales basis. X.X were days Inventory at

non-GAAP Finally, from sales current quarter $XXX million guidance. levels, our XX.X% a third million XXXX range range to estimate business we Based $XXX the to to and on gross to in margin XX.X%. I’ll discuss QX our

million and could to $XX.X could million operating from $XX.X from to range range SG&A could million expenses million R&D $XX.X $XXX non-GAAP expenses QX range million, expenses million. $XXX.X to from $XX

to be estimated expense approximately to non-GAAP interest be million approximately XX%. rate $XX.X and tax Non-GAAP

assumptions, third to $X.XX or these per share share. Given million $X.XX to could $XX.X earnings quarter range per net $XX.X million from diluted non-GAAP

to $XX.X at be million. approximately from costs income be costs and expected net million. In amortization of XX.X interest to expected million GAAP million, $X.X outstanding. million Restructuring share $XX.Xmillion,integration to $XX.X the expected million range approximately is estimated shares at $X.XX third tangible $X.XX expense related interest GAAP the to estimated on $X.X assets $X.X quarter, income to million diluted or $X.XX approximately is per is approximately

questions. the for the concludes remarks. call prepared This now I open will

Operator

question Our with from Patrick first Ho [Operator Instructions] comes Stifel.

Your open. line is now

Patrick Ho

morning this and comments that much. of just give some you maybe trends a a some global felt qualitatively from the products they and in ultrafast, color us the like impact? little you either Thank impact Jerry your terms were that the the of very Advanced macro today. ultraviolet were follow this regarding Markets as seeing whether to lasers affected or of market Can we’re markets of maybe some even the the

Gerald Colella

Yes.

by So areas markets maybe answer can product I the in. of that we all different and kind participated if setting

to I So question, answer let’s will finally Thank [indiscernible] Patrick. you. way to it. your

on see the about industrial and two we business last are see then their semi of positive a this of around So semi positioning forward. we the but the what going side, and bottom still they moving commentary several drivers encouraged more and days bumping over lumpy

semi having customers are the of more with we positive And as discussions late.

and that and research of which and side, health but The defense semi business the industrial our Light, science, both parts solid good. consistent. is are So affects the

timing pretty discussions China. it’s side about factuality the The and from industrial the around issues up much and with and the Asia, particularly are trade lightened customers an has in effect more

the So for affecting our we business world. concerns impacted trade the side by has some even Newport Europe of Markets, the and though and been other seeing our Corporation Advanced that parts previous of into our and of industrial we’ve that resonated of set records are more out

strength we solar, by terms strength of in the some in emboldened good though are there. of both semi We China saw and pockets directly,

lot mostly now and Motion that a to to back a the expected and engagements, to and position. consider the help? but we very circumstances right of Does being little now So hesitant pretty come customers there’s a some say, it’s of matter strong now of Advanced buy circumstances industrial want conditions pretty lots much -- we flask the of in to there’s Light who of right where affecting the And of the lots much a given the just the probably side, end a year are of there’s to ability if I change. Markets it's recover a be designing, with

Patrick Ho

laser for about an growth of John, and particularly and how my the investors how the on follow-up give spent forward driver introduction that talking update progress with Motion basis? accessory that some of time Light a and going Can as evolving the going products on because we new question Maybe can side you thing. be a on strategies is

John Lee

have portfolio we so little that's talked year. about. So and all we released, laser lasers Picosecond we a in that that’s second didn’t bit released the Picosecond we laser this our the IceFyre what

without last first The portfolio. has gap lower complete in about growing even power a we portfolio one over laser our a years, growing and though talked at and was was our business was had that it several

of because business now that will continue and fill portfolio. to portfolio we laser the continue that believe to So we grow that we

Patrick Ho

on terms quarter. question there, the And close revenues mix pretty in despite margin in the is projected gross level? final are helping in decline mix it me variables XX% came are that to the gross margins, the pretty for margins September the market stay that of well to profile product the actually much key Seth, in What and

Seth Bagshaw

was a how variable QX Usually Yes, we ENS gross that quarter. you the the particular have ESI It the effect our unexpected the roles know, product Pat. margins margins grew model XX% mix, exactly favorable QX through as in thanks, out. guidance division. In very

the mitigate and We cost of have proactive cost the and sold. in controlling on to really continue back year we structure our business the cost being QX XXXX been last started

So think favorable structure margin down. driving across are cost board the very we I profile

margin all our relatively consistent keeps Our real are typically are cross in markets well. advanced divisions that high business

customers are can invoice But proposition generally the that and well very we based you again value we downturn. value we in tell

them we we’re factors model. happy in all the kind hanging still are pretty So those well are

Gerald Colella

volume – within the this business. past with is we the in took we this of even what cost saw Patrick actions even the on Yes reduction Jerry quarter based the

been the of cost the the business, our shift is the future we out the where we our high one opportunities think the profile this is we cost We always investments of will on would probably see in the things impact our make growth and take product where to business volume an that never either also are I financial has we've So stewardship of based coming. our growth company. it

the certainly and over of execution that markets we structure control being the a thing within the we one that’s So we’re cost company. can necessarily of company that control but proud history that our public XX-year

Operator

from comes Our question next with Scarnati Citi. Amanda

now Your line is open.

Amanda Scarnati

the thing to quarter down in of in moderation in next seeing? space semiconductor sort then had like I throughout somewhat just that implies the digit growth somewhat single expected Is would question, of SMEs going advanced year. if you want And just quick high said you that low sort to a flattish for markets semiconductor. follow-up that how that growth double-digit the impact be know you're to with can

John Lee

there the minus is still both Amanda and markets plus and take order in of I’ll think variability Yes so that I on is John this X%.

expect down to a but we little bumping around little both So just cautious. and flattish. a to guided be be bit still really it don’t We

going So as I versus kind message to take any about advanced am markets. of that semi

Seth Bagshaw

lead our company Yes, ramp the can of look and faster than very short. has others with very, part times problem the the advanced that is we some is are

turns business going So are the we quarter. have business very quick a into

of towards feel the things will we optimistic quarter So turnaround. goes the that the business that how at as sometimes but things, covers look towards we year end next very

in agree and [indiscernible] are John right make with semi project our X% X% now the make a can sure goes between John be it we the pretty difference we they a mix close that way I Like order are to when said and in credible big could you're or here consistent there business XX/XX and and mix markets. advanced mix that to non-semi the want we

Amanda Scarnati

be sort semiconductor – quarter up the starting visibility more is and enough fact comfortable level Okay is see there? when see market customer one and to to going what’s your happening of ramping then that start to delay there customers or are that inventory within isn’t your you really at inventory

Gerald Colella

it No inventory and looks the as from what have we can relatively holding normalized. see stabilized

we’re point the know not now yeah point think this reduction So concern it’s purely the I where at is I at inventory main demand.

Amanda Scarnati

everything And have the other customers board? question sort across last the I that on are your different is or [indiscernible] different similar you is seeing just at customers key behavior of

John Lee

don’t we think I implied John, any the semi real it’s differences between [indiscernible]. customers see Amanda, OEM beyond our

by and they are discussions affected key I user. think by end announcements the equally all

difference don’t I any there think real no them. is between So

Gerald Colella

They have of which over for gets do inventory order an customers ordering techniques some in they the all differently though, different position.

are time side bulk prefer, Now in by supply some just which line customers customers quantities. other we

to a going the So or wild python and say more pig [indiscernible] you MRP as have they setting. have others level

practice and inventory consistent with point. are us this appears be will where soon be business peculiar discussing that at there their to different, So probably the are but

Operator

Instructions] next Deutsche Bank. Ho [Operator comes question Our from with Sidney

line Your is open. now

Sidney Ho

Want to midpoint markets the the the to X. and flat guidance is go semis get plus but X%, that guidance you are that down or think to minus to and advanced both back to of seem

to QX? want going to question way other – are you make don't to anything the forecasting maybe miss are that because is sure Just specifically you do ask the ESI to is what specifically I in relate is

Seth Bagshaw

or we Yes, or to QX the [that million its we QX going high and Seth question] flat feels your said think forward. so in in is then so minus XX about believe plus it’s we quarter markets advanced

again little short a impact lead we Jerry level certainly trade a semi as Huawei again of and order basically little kind well. And contributed the expect so and rates business the QX seeing. times bit it’s based [indiscernible] as your being seen or bounce then And that again QX pretty we’re now the and as So mentioned order rates. to on OEMs of on turn minus their business, level business around going the quickly that the right of plus headwind

Sidney Ho

term for kind kind semi related you to the and follow-up have has the guys consistent The talk stabilized. of few inventory business that guys been using about of to last months you

month-to-month of this month orders sudden of basis If of latter part any at the the the order look terms kind in is quarter. first or QX change you in patterns in the there of

customers because in is the asking am want the logic have if about and I some see reason I to you’re as memory. kind strength pattern foundry customers, maybe weakness some of same of The in seeing talked well?

John Lee

Sidney, Yes it’s John.

So I seen consistent think Jerry I by with foundry mentioned the those yet but we as discussions commentary think kinds with customers don’t our of foundry and our are customers.

think that I that’s the as little seen hopeful going at forward maybe in we’re yet we So that but why QX. haven’t we’re bottom,

Sidney Ho

question – about ESI business been in has advanced and to is last headwinds quarter will my second QX. first you markets you that been The take if the year-over-year the business down XX%, and quarter. the Maybe in equation, XX% on about XX%, talk has continue maybe that third out in by

start does GPP. based look point rate to Do on moves like plus will you longer-term? an I if it year-over-year your of kind into growth But is growth quarters. depends see around inflection one GDP believe you a I on but seeing importantly does this or or that global want see two still more overreact Do what business GDP it to you again guess headwind, the and don’t

John Lee

know think ban that in with and then when I things market became it tightening for exactly know Huawei much was discussions you came and we right muted. was started customers, many more do and we that industrials. the And customers the when yes advanced really key Sidney

a on thus And demand that several issue so issue. we're is positive still because is and this market, geopolitical very

light that. get piece those when we motion work that surround division settled, in from should so also portfolio And expect things our enter

Gerald Colella

advanced and about a XX-year historically about or CAGR XX-year Yes, and historically for was line the “non-semi” period our X% consistently. markets

record the us. towards suggest that track for that history the is suggesting something appropriate long would are normalized So rate growth are

and I nine financial track trend trend business a a short-term of consider that’s view have and six-month performance I company the think at And short-term the very and just the was people the QX think as worried you again would conditions. that market month view looking about then to look of QX I regardless long-term the of record

Operator

from Krish Cowen. Our next Sankar comes question with

Your line is now open.

Krish Sankar

them progress compared over we three business few how had of quarter characterize for on or did I like get the analysis or a it Did Jerry it months quarter? semi June better ago, your deteriorate to your plan? materially the vacuum

Gerald Colella

semi so overall bit, a as you It about you Krish. buy say or consistent. the the quarter, pretty relatively quarter-to-quarter was can Like It know, over consistent concern. gives pretty bump solidify would consistent. look said Overall, bump around business so relatively a in last a things was I get strong X% far annoys the that's as down, in the until technology a it’s conditions that I and very project business, you but big that the

over us And one particularly year line. feel we single in the put $XX long-term, analysis, rent search also capital business our capacity didn’t know about put of if to some the short that line good a million moving never business, million capital last confidence and $XX product thing we’d into both give finally and upsize let of product we in that -- you the worth as to in about vacuum

the comps So now. we have business that’s in that right

Krish Sankar

remember the is is spoke or the etch dimension, application two, etch power not it same it for about one quarter a then is etch a you I is so a critical critical supply the so same this -- conductor have of prior application? or this And customer, and thing, a different

John Lee

we’re conductor Krish, it’s announce about Yes, so that. John. etch to three I’ll design wins. take

one So and third it’s Couple ago have announced one its and all one the you're conductor going this customers multiple critical second and one. out etch. a of is months we first the

Gerald Colella

business, to We do. extend area capture made critical been and years lead In we which have etch will live we dielectric for the and an and capital we last in the This several to focus. our dielectric conductor to applications. are is investments etch engineering significant of in

Krish Sankar

which as you to etch, John that, and then would power more conductor supply a etch maybe is dielectric between intensive? say And follow-up

John Lee

intensive is turn the [indiscernible] more effects. dielectric supply because by Yes, of the etch power a lot

more per is you to ratio of expect features. chamber So power there as etch content need higher

I applied etch, processes, them see we conductor be is though to expect are to also some high trend is increasing to power a over etch that conductor our content would on so that of conductor starting tougher also time. say be ratio, etch going

Gerald Colella

That’s spot. like where low in we applications We're the There’s growth pricing interested worth low to semiconductor plenty the technology right makes are business years, our the it's sweet that's Krish, in not that. where take end, It the strength investment power. from business John. long-term do for last is high people really interested several and of critical, us higher. been our commodity in the we more in which revenue look a

Krish Sankar

PCB questions yet, And is on? is ESI revenue MLC two as like John not some that capacitor the is downstream points stabilizing the Are on of data Jerry. about to something or looks and I you then the just ESI way you the One going other follow well. look had else the is think is side it if potential your but to there going at

Gerald Colella

it’s that. I‘ll Krish, take Gerry,

the next like right, a is are PCB we which for history and in drill our its about little CapSton, you stabilizing bit so the first this have generation flex Europe. looks delivered So talked

a already CapSton I When from at remarks, it MLCC, look prepared But the you in customers it for shifts flex a drilling. mentioned PCB Asia to we double-digit look as also numbers we systems capacitors have you're have right historically perspective, trend now. and period made small it’s had that for test been has digestion and that over bill long-term MLCC testing right

are chip last automotive the targeted and more large more released the towards communications. recently towards small where ones we But on that's fall tester targeted

that And system the consistent. of part test has very been so actually

to so So long-term that see quarters. of over driver has continue and the we cars the into really been as automotive incorporate its consistent MLCCs couple last a more very has positive and

lot that the the we then had smaller so in And period. digested are was overbilled chips driven iPhone’s, and

profile put small that’s to on smaller phones, positive XG, large because these will chips very longer-term and lot testing. with we positive into why we’re continue will you especially so more be both are MLCC need So of really a chips chips and

John Lee

the prospects our input MLCC a due short and be the to about long-term a time for an term relatively got sure personal bright over a period the automotive, year of be very extra that five applicative appears oversupply, could there’s transact for We’ve but double-digit of to a bit that. devices, so the CAGR

you a thing to tools value at those and cost there’s get if do, Another chance and look the structure analysis legacy perform tools.

a do when for So sometimes side little cost repeat on can you're you know, bit the things to best do war. the that going you of

we work margin So to expect the well. deal products overtime on as the of those

Krish Sankar

do taxes last longer Seth, question for pretty seems about I the did think hear then And how you XX% and right high you only in term?

Seth Bagshaw

Yes.

the slow coming up dramatically. You will What happens the year. real rate are out rolls is down, dries right. into you way XX% income like the mix On normalized long term more the or this

this uptick XX% rate That pick back to and was. expectation [indiscernible] full reach it looking think down time forward of back when I volumes take sure. some our to year historically year that comes and up So again for XXXX, XX% XXXX will

Operator

comes Company. with Mark question next Benchmark Our from Miller

Your open. is now line

Mark Miller

Thank you taking my question.

Samsung for XXX that the SK Hynix been you speculation would and moving Just wanted for case interpret wondering if have how might later heard it's that and you some MKS? be up that about you ramp, just there I'm be

John Lee

Mark, Lee. this is John

provide. be enabled XXX since the the is and we certainly OEM rumors will meaning the layer, comment on when advanced using but outreach the one that goes that share , that say those provided the those that only by I industry So that price have by most we don’t to can’t power would OEM know large

positive our power when so business. And that That that. we’ll happens, drive very about obviously be

So we would that later. in start there sooner than lump -

Mark Miller

Toshiba any lot with that, Have change, and there seen estimated could a the of digital a of part significant outage anybody? and lost the be there ramifications wafers have power been offer you the of Toshiba seen you the was any Has at for fabs industry.

John Lee

It the DRAM. short so whether starts, that the does haven’t up has it's supply read the in Mark to up of wafer and terms or outage we and that’s like because is bullet -- because just now had catching We seen to about a look demand NAND [indiscernible] whether debate impact is D supply ourselves. you for and direct term NAND catching is any stabilized pricing of D

Operator

next Instructions] Capital Markets. KeyBanc Our comes with Weston [Operator question from Twigg

now is open. line Your

Weston Twigg

when HDI just to am kind in several embedded revenue touch and if First revenue the maybe you of idea wanted in us and give to like geographies. on of order the XXXX? that look what an wondering ships could might that base could opportunities through I product translate

John Lee

It’s at John. I’ll that. a take stab

they shifted So recipes customers come so happens HDI. are try local bring Taiwan, the we centers markets by for literally their regions can and and and biggest different those application their A, have Japan, go into China panels usually three what

occurring the is, major to and So proving processes happens we’re half to the to and successful them expect of XXXX make PCBs months next volume usually of so it happen we for the the some factories three of kind first then in year cycle the to what orders next next testing should start first the then consumer what generation the the the be cycle, in of tool product ordering in six will will this half these customers flex be if put that will

which be then so pretty would think So that over build I we years if the the wins market the two design million out, is they region with get and market key couple of Then how much, happy. XXX gain we’ll once a share. million zero XXX customers have we

Gerald Colella

for ownership based though accuracy. positive is feedback the of and of terms The speed have the one rewards tool, extremely technology on tool that for of we actually on HDI in cost initial

of I MKS, great think it's independent that's tool. So a

So the early We're going have be is a to now, this with also in the customers involved at extremely to summit start, with directly. right positive. fall bringing tool

So looking us. see forward tool tool inviting the of customers lot of directly the to a spot and operate with to

Weston Twigg

you're the maybe manufacturing batteries could size facing some just this I'm the us you laser market new And opportunities for you in help And the then higher likewise, wondering that powered it and that in wondering, of discuss and that if advanced and would also market? address solar mentioned competition displays.

Gerald Colella

picosecond. Yes, and the laser, so pulse this category, width, that's defined is by

version, in participated the So the market market. [indiscernible]. no we XX And announcement, first nanosecond watt prior to we picosecond participation the had the in

picosecond, we we So of surrounded there. have an entrance the didn't kind

just first we beginning demos interest, and already this precision And so and nanosecond are moving announced see large XX so shorter be people width to numbers. arguably, Because customer lot big version for this just pulse to to there, by participate get materials more as lower out we as is watt the there, way, could are power we're market different version. the those of in a

So add expect our this going we will to revenue laser substantially that forward.

John Lee

a give historical little on I'll perspective Maybe it.

million So to up in a XXXX. XXXX it was $XXX XXXX, in XXXX, our million, from growth was it $XXX laser $XXX for to XXXX of in business million, rate XX%

opportunity in for a opportunity micro we there's and these general laser is. just light huge newer the more So business the and the great release more processing in applications, industrial based on space the

Gerald Colella

the more little about And West, differentiation. maybe a

with was there we're in industry Talon, sure, in change out picoseconds a the we terms for the ago, trying of way did X-years people released Nanosecond nanosecond. but what there leverage before us So performance. are in laser to we for cost

the lot why from we're that's been very the and of extremely And incumbent. architecture share And leveraging that took same picosecond for laser. using a successful nanosecond, Talon has

out out from better So performance. is something we're we're that's that not to, much just with going with a something going cost there need

Operator

Our next from with Diffely Davidson. D.A. question comes Tom

Your line is now open.

Tom Diffely

inventories about like other of look terms I'm what the OEM do So inventories? the in hold inventory we and typically advanced levels they curious, talked of market customers. what at a the lot so customers

John Lee

In your was advanced market inventory about of - question inventory for customers? terms

Tom Diffely

Yes.

John Lee

do. Copy they it's typically don't of OEMs less There's they the buy, hold pretty when fast have that the business turn. Usually of Now the Exact semi kind there. they inventory issues

Exact So of change long-term have inventory they don't can this motivation have quickly, to you to a lot can you're effect. because so at going hold that Copy

inventory actually no, with see customers. we So, market customers, don't lot industrial a of issues the advanced

Tom Diffely

that big a slowdown in it you And post like space. sounds saw ban, Huawei

curious, that. seen so they you are projects or have Just of cancelled kind put on for just being hold or

Gerald Colella

a to on the that working projects good were continuing. we That's The ban, question. prior are

Just being are our the are orders of just more magnitudes customers because less, careful. the

before order million ordering the they for they and better might on until of $X gets the for waiting the order million example, markets $XX of now instead clarity rest. lasers, So

far. our really tapering experience cancel. been so they'd it's about rather than So down order how That's much

Tom Diffely

And specially supply that mentioned I'm you etch then was is and look the the at curious when market, new power but that product foundry DRAM or for you that conductor V-NAND, a V-NAND applicable logic? also to

Gerald Colella

as can so conductor. as low that, win to to, high But aspect It's there. ratio aspect obviously, of a it applicable result well choose to of a do ratio if they actually DRAM. It's applications etch type

Tom Diffely

the were outweighted Seth more half, ESI. halfway period that kind it through the is is like finally it reduction program evenly time? be you the you do timing on through synergies to the years for or spread be two And of second on What expect of sounds it cost

Seth Bagshaw

things whole account [indiscernible] to The to XX months. XX

and kind that announced, like a XX period. we in is approximately the of we goal to Newport months got done XX XX Our month

for to ESI would for sure, best say try we months I close So, XX but we'll can.

quarterly say we'll schedule. minutes [indiscernible]. the cost on very a achieving have update we'll of really XX this would But synergies. I we're about think base So at ahead But I we're strong total point.

Gerald Colella

it And Newport, synergy We I out. was put we we beat for XX put XX historically, finally that think achieved. we target

can a shareholder So our historically that internally the the like XX historically. what that at better don't don't feel number justify over to big was. comfortable than done hopefully we've we to with the what of come a do and synergy We We deal number. good Company. message is think We of synergy we've top

Operator

turn further - time like closing this At remarks. for to I'd call to the questions. no back showing I'm

Gerald Colella

quarter Colella. and for Gerald another and non-GAAP is was pleased which strong of our second this above We're quarter. earnings results the operating non-GAAP the execution, drove with financial Sure, of operational margin our guidance. It our mid-point

Our markets. in advanced to continues diversification strategy drive our growth

diverse have confident us the for and have are long-term continued put exposure success. our positioned we our that end place in strategy markets to We

call Thank the today. on joining for you us

we our forward third to you. interested If on updating XXXX quarter you in financial results. look MKS, you're report our Thank progress when we

Operator

This for today's thank gentlemen, and in you conclude your the Ladies conference. does program. participation

disconnect. have You great may a now day. Everyone

MKS Instruments (MKSI) 31 Jul 192019 Q2 Earnings call transcript