MKSI - Earnings call transcript Q3 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the MKS Instruments Third Quarter 2020 Conference Call. [Operator Instructions] Please be advised that today's conference may be recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, David Ryzhik, Vice President, Investor Relations. Please go ahead, sir.

David Ryzhik

Thank you. everyone. morning, Good Financial Vice this Ryzhik, Executive Investor and and Relations, and I'm by President John joined Chief President Vice morning Bagshaw, Chief Lee, I'm Seth David Senior of Officer. President Officer; and Yesterday, website, the which quarter for financial third closed, after to of our we market posted our results released are mksinst.com. XXXX,

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

the and discussing a measures. of our GAAP refer to results measures. financial information non-GAAP release non-GAAP reconciliation we be for During Please press and regarding our financial our will non-GAAP call, financial

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

John Lee

end end or thank $XXX at is of our Thanks, record were third high diluted quarter, us guidance is high revenue which earnings you David. we per range. range. net million of everyone, of our Good today. share, morning, and the the above delivered joining Non-GAAP for In the $X.XX $XXX guidance which million,

of employees a especially record moment take achieved who efforts detail, results around I Before tireless the challenging in results, to MKS trends world dedication the acknowledge our more such I discuss and to environment. in a and market these want

the resulting showing most our productivity, impact caring did extraordinary compassion serving Our towards to the each with playbook, focus COVID-XX pandemic. in and this other. importantly, their innovation maintaining executing display amazing from on not Yet global circumstances employees on dealing continue resilience customers, and

team, One what MKS did. strongest at a that's and guiding as win of we our principles is to

our detail. subsystems. let achieved strong Power sequentially more in notably discuss our of where Solutions critical as in quarter. to me semiconductor Now grew business, third our another record our results XX% we portfolio experienced Most demand market quarter across Sales revenue we

extremely have are in of the technology large the and deposition our for Atomic reliability, footprint XXX% plasma remote strong, delivering first growth especially XXXX. solutions with sources to applications. be our to ownership We three in Demand The gas of led quarters pleased market-leading sales our orders compact several CVD execution applications. advantages layer semiconductor and cost year-over-year in for and plasma-enhanced Power, reactive continues plasma deposition and of in quarter over

and seeing our foundry nodes. ozone dry Our processes, traction and dissolved to continue strong systems ozone and wet advanced for applications ammonia clean dissolved systems demand are deposition gain at leading-edge

Our capability to most portfolio us unique apart set our around peers. and the critical vacuum broad have challenges chamber from solve the

are the semiconductor through continue into with help problems. quarter, leveraging their the metrology initiative, and toughest OEMs expertise. applications, world-class In several our solve chamber. lithography, continue inspection we our our goes we optics we to expand optics, wins to strategy design photonics and to beyond engage where secured growth However, additional and broad motion vacuum we And third key

demand As our in remain fourth market we the look expect strong. semiconductor into to quarter, we

as which results anticipated. advanced in our X% markets, PCB drilling we seasonal grew better applications our with expected. pleased than saw decline in are a We We sequentially,

demand stronger research by offset and sciences health life was in this our markets. and However,

manufacturing. particularly I excitement underpin in drivers talked this to for precision around that electronics During laser our the long-term past opportunity we've advanced key highlight see few earnings the like opportunity. about would processing, three calls, we

were laser smartphone used precision require manufacturing. that devices electronics solar of precision and expansion lasers the mainly five for ago, is First processing. panel years

we autonomous tablets, devices. vehicles seeing many and to other precision electronic wearables, expand Now are processing laser

number per a increase years smart many we components are the phone. Second Today, significant the in dealing is device. hundreds dealing with of in were with electronic components five thousands. of we ago,

the expansion in types continued being for processes laser-based deployed manufacturing. is Third the of precision

customers new ways lasers. Our are to use finding

where laser laser micro portfolio with For surface uniquely offers example, Work in piece Surround motion attractive doping, We believe confluence growth positioned of drivers optics, and an photonics, of our drilling functionalization the welding. systems. the these and are opportunity lasers, we

to new interconnect our announced first excited drilling for order PCB have high-density multi-unit particularly are our We via tool.

MKS this Our This differentiated for is important million customers into as tools tool. with an milestone installing market enter strongly volume $XXX production. are we for our a

are we anticipate revenue and in remain fourth markets the with quarter sequential consistent. in the growth demand advanced third to happy We in quarter trends our

and more over Before for XX. call virtual growth over please plan the the call coming like I that a Day Seth. to Thursday, And the December We I'd weeks. will Seth, long-term turn Stay model. providing on financial information strategy holding turn MKS to note tuned now Investor more insight our be opportunities, in into to on

Seth Bagshaw

year-over-year our cover end our third as guidance on as above reflects performance range. up for guidance. sequentially the quarter $XXX sequential and third advanced Thank record Sales semiconductor This and of I'll results fourth well John. in the X% strength quarter our were growth in markets. market million, quarter strong our you, detail high and our up continued provide a additional XX%

COVID-XX-related Solutions had by to by quarter, university our impacted record driven up fundamentals. in another health quarter earnings flex second first more million, industry relative improvements PCB XX% were Markets seasonal the For that growth and year-over-year XX% products. the posted sales expected sequentially, consecutive across this decline Lab reflecting defense, year-over-year, research and $XXX the marks record Sales semiconductor we sequentially to business quarter. markets, Power X% and Advanced triple-digit were noted quarter our strong of product in the closures market In in up up but million, which portfolio, life offset than $XXX in research research business. second which call, science our been saw of a stabilized strength our and We third quarter, particular,

that in are the has our grew led pleased and over returned reopenings to market XX% We quarter, revenue to sequentially, research from now pre-pandemic by third university announce levels.

a the earlier, system John for in As the acceptance, we our following order we Geode mentioned third HDI multiunit received third installation in And the early customer and successful in recognized the revenue quarter. first unit quarter.

XX% split the and quarter, the and markets revenue respectively. For XX%, advanced was semiconductor our between

mix Third Division. of products discontinued our was and quarter charges inventory below which slightly to our non-GAAP Light is Motion certain midpoint margin primarily due XX.X%, gross product for and the guidance, within

compensation our financial strong to higher incurred variable costs results. also due We

to the more these in on for the variable items compensation. focus expect quarter, volumes our control, continued $XXX normalized were with We flat to expenses Non-GAAP in the operating return million, even higher revenue reflecting second quarter to cost levels fourth anticipated quarter. third

increase non-GAAP a XX.X%, XXX reflecting sequential financial margin operating points, Third was strong our quarter in of leverage basis model. operating

to a tax $XXX realized amount original synergies net million million share. acquisition, and earnings interest have $XX quarter, and increased We XX%. quarter diluted we're expense from exiting remains generate and a geographic schedule. pleased synergies. is for of ESI of the that the $X.XX announce were a continue favorable we this million taxable total have target This income above deflected to the for third was cost cost savings our and now rate of Non-GAAP annualized additional Non-GAAP further and of net mix well non-GAAP third per $X.X quarter ahead was these

cash under liquidity a borrowing turning with line balance we capacity quarter, of Now and certain short-term and sheet. requirements. million asset-based incremental $XXX an maintained Exiting balance sheet credit strong $XXX the to to borrowing-base and the subject investments of third million

continued anticipate and times the per the ESI XXXX, share. Our fourth exiting quarter closing decreased, X.X our had exiting leverage prior acquisition net leverage our a $X.XX has leverage Consistent to of from ability our or payment net cash Since ratio flow. in third one highlighting -- $XX quarter. February of ratio the the generate net strong million we diluted reduction in per and ratio quarters, with further dividend we times decreased to EBITDA of

capital, or second second working X.X Inventory XX% were the revenue of at levels, X.X outstanding terms $XXX revenue focused days the times to now was $XX quarter our In cash I'll again expenses new million, our the percentage minus days flow compared minus our times revenue sales million, and and And non-GAAP quarter, XX third second levels, improving at the were fourth to of quarter. for set third on record million, estimate $X margin of We XX Based million. respectively. the and current cash a conversion business turns product Based outlook. of on quarter. of free or minus day quarter fourth quarter million following on cash $XXX that plus cycle. we the in quarter. flow non-GAAP of flow fourth gross of and quarter quarter anticipated compared XX.X%, point, end at operating estimate turn remain plus end or records we plus $XXX cash operating million. mix $XXX Free one to

For expense anticipated to tax XX%, million, rate and non-GAAP expected be interest the be expected approximately a fourth is geographic quarter, income. of reflecting non-GAAP taxable mix net to $X approximately

back expect assumptions, for diluted $X.XX. $X to to now quarter minus of plus earnings non-GAAP we I'd like Given operator fourth call these the share, Q&A. or net per turn the

Operator

question comes Diffely Tom first Our Instructions] [Operator you. D.A. Davidson. from with Thank

question. your with proceed may You

Tom Diffely

for the call. Thanks taking morning. Good Yes.

maybe be see key you us, I of forward? the do are the the the remind for market. order first just market? we think Congratulations marketplace> seasonality looking is But you're this So that it question the why should HDI what market production on winning going on in there. in typically that And What type drivers first that

John Lee

it's Tom, John. Yes,

we have of about make talked we've highly some features the So differentiated. before, it that that

throughput is there. The one than throughput, higher out what's first

the of is Second also weight. footprint and all

with so And locations. some manufacturing it -- manufacturing been respect into to have valuable customers to our those of putting very

does little the follow In of seasonality, bit consumer terms seasonality. it a of electronics probably

it's flex. to you And gain $XXX that well. just that's of that to market, only hasn't some So a as it. we as changed And which, look still share. million have begun we of And similar how really know, at

excited about growth really the we're So potential there.

Tom Diffely

guess in your do think years mind, this market? participation you the I over couple Okay. of all in from with how that out the next rolls

John Lee

Right.

XXXX, as you've as wins share. have beta now, We've we've the discussed been customers past. our very in right So on working design in we with little said,

And so for set in cycle, with we those up the which very should next XXXX. begin are customers well

we'll do different as volume, those customers terms as we that customers kinds with we processes. different other that, customers of wins in have design gain we as well and continue working of already with So those or

first kind So, we'll year achieved work that win design I those this where will of into be think of some XXXX revenue. we turning the see year

Tom Diffely

had acceleration you've two, into success then as are see market, the the next And these in when you recovery Great. look the where tools Okay. expect follow-up, me of you'd the of some would or we further year going lot success Power a that your in marketplace. memory market, at over a if

John Lee

towards of It's memory. correct, in strong America. That's Korea lot is A of also leveraged based well that memory, our leveraged OEMs are Tom. as out that are towards as OEMs North is Power leveraged towards

memory we So that picks should up, as see benefit.

versus We are DRAM. slightly more leveraged to NAND

change in a the does But Power. us. that for general, So is in bit memory little good mix

Tom Diffely

you. Thank Okay.

John Lee

Thanks, Tom.

Operator

Ho next with question Bank. Deutsche Sidney from Our comes

You question. may your with proceed

Sidney Ho

couple Thanks question, them. of A for taking Tom. my

the the maybe So on year-to-date it at where the In very Consider revenue year? better, slightly -- XX% may think Fab year, up outgrow the exiting itself. the you be plus is obviously, If impressive do Equipment other stronger words, at to flat still maybe chain, point, this to supply inventory XX% you're you your year? Wafer for growth, normalized next think at obviously, looking you much -- continue than the semi in do full side, WFE your year-over-year. the are customers market you are market can level

John Lee

basis look underperform. I demonstrated question, we've during as net-net, then which correction, growing the Good over always you still target which downturn, outrun mean, points, XX we And know, always semi the faster our at than model last in we XXX typically, But when years. by our is we would in We WFE of outgrow. inventory ramp. the Sidney. there's

that's think But if So of continues growth turns really -- then and been we of down, perform I out, And leverage. I And we'll WFE to then, longer-term probably outperform. still WFE if cycles we we underperform. WFE CAGR. grow, it how about points may basis If XXX we look the course, kind think about at through it above there. flattens always

Sidney Ho

helpful. Maybe Okay. switching the That's advanced over to markets.

the that what know there, about some businesses look about lot you you I'm that lines I you capacity are there's research range? -- areas shortages. we where If I start think back QX, in built may have that along in at still below past thinking that the couple years the we a are normalized But of talked seeing of understand the line different normal. to a

John Lee

Yes.

a I different they're industrials, think electronics. But markets bucket. part of a to advanced automotive, we do that because of the up. in of markets consumer coming like markets Those things our those are lot signs been have to see also are kind And for not instance, advanced that significant markets. those levered -- we'll depressed industrial that, COVID, back have and start of of manufacturing,

started to of companies some other other see You see automotive and levered the there. calls from to life

up as haven't seen pick up area we that yet, pick to expect but that that's also well. So we an where

Sidney Ho

for one Maybe Okay. me. last

described is the the gross line, at away to prior than you would as to that the the gross quarters? next why not anything Seth, for QX. could revenue your On of in again, a may reason lower QX, highlight couple at XX% expected that you the record margin that with go be midpoint headwind margin peak be of compared But margin margin gross gross high side, for

Seth Bagshaw

you, Sidney. Thank Yes.

have I is XX is, probably rate certainly Light XXXX say from revenue ESI XXXX, fourth it. in then if you China, and really would trade years would in sort the there if run it's about points well. obviously, here a quarter the look you versus back only U.S. duties and back basis and of XX P&L went in been go pre-acquisition Motion. ago, current there has the to the several the So of obviously, It to between friction as piece that's back And the and --

we QX, in normalized. not expect other be remarks. more say. We the kind was would that normalize fourth were they're to will Motion those of quarter prepared items So all the think in I unique in really we than in quite to apples-to-apples, the and Light it quarter. mentioned the And And quarter. unique back that, margin But as again, division, the I fourth the saw

Sidney Ho

Great. Thanks much. very

Seth Bagshaw

welcome. You're

Operator

Instructions] Scott Our question next Rosenblatt. Graham from with [Operator comes

with proceed question. may You your

Scott Graham

question. taking Thanks morning. good Nice my Hey, for quarter.

at follow-on of catching maybe So the on could -- that's I DRAM trade That kind XX just a with us question are to I can into of was market. it through wondering, over with memory skewed how months, DRAM if any market than improves? push potentially DRAM. being there was if and cut least market comment prior into wondering outperformance a John, sales you next the just NAND sort in plans doing of more expectations. memory just to some sort your that, I you the wondering you're in as about was maybe of the toward up

John Lee

think Yes, NAND I marginal a between Scott, it's shift really and DRAM.

quarters the as in critical, VNAND, driven process VNAND, first XXX% are levered steps of foundry. for certain over well three But growth the rest evenly fairly to critical our between and is -- in XXX% and DRAM, portfolio as that has We highly that Power.

mostly the VNAND. in outperformance So due really is to -- power

is So the -- rest between but much levered portfolio and of DRAM pretty the evenly NAND.

Scott Graham

SMIC, very what you. air would things headlines as issues? what maybe a Then, be you, those she are WFE are The together Intel, it goes? a is your next headlines market or Got around comments Thanks. of WFE? year? from sort lot you as Okay. lot to there X-nanometer, well another of ASML, -- maybe a Or just on, maybe pocket Is pull going of question you and customers in That's next helpful. What of for is hearing? maybe question going those a as two these hearing customers from about steady saying your Is that you're be year quarter potential may John.

John Lee

XXXX fairly guide reason don't But Yes, public of we it's customers when Scott, We hear customers, and so positive than quarter. you any been the to in that. their for more XXXX. don't a dispute statements have out to our relative general,

QX. As to for guidance in continuing QX, we our be our you commentary, semi strong see our in in see

WFE companies through to then grow going we make longer belief monitor going lots therefore, those that will so And a cycles. of on. very things of closely. go certainly supply to that when supply the grow still the there chips. that somebody has And is static, tools And But to is we of to for fundamental to WFE, the lot want we we our share the just But back term, that.

whether one longer from so that think another have. product portfolio moves to not we're as concerned country the company term, And we or of to it because differentiated I one another,

Scott Graham

that. I for hearing and hope there you're on we're in these and of kind question but others, I you days. to has is, my capacity? to cases how affected But out there. I in the be of the agree. final that you not do what we're really think, there. outbreak that follow is Japan by here I And maybe that John, is on-site much I one mean? business there squeeze for commentary know that's I and big your have Europe, both that simply here. another of some Thank U.S., do competitors and much more rollbacks know otherwise with cervical question I COVID off Europe, sort If from rising, guess you potential been

John Lee

affected Yes. COVID ours of or only a for normalized factories factory the that our it's issue our in our of suppliers' down in again, now our if No, back kind of certainly Everything we becoming an factories, looking coming but capacity. locations forward to having for by suppliers'. concern COVID of is terms shut of first starts our either reduce some then reduced that to supplier at a factories, phase couple time and factories certainly a of were capacity, having weeks

we, So now something watching it's of a though, with say, not at sure I we're very it's closely, least Scott. certainly most the industry along would that I'm surprise.

what know shifts, have We test, we We know do. isolate. in to place. to to We know we separate how know to processes how how

certainly are shutdowns. out effect those least it going trying these have going at areas very we're as something processes still along. some of But not large be as So can an figure we're to see to some

Scott Graham

Okay. Thanks a lot.

John Lee

Thanks, Scott.

Operator

next Patrick with Ho Our Stifel. from comes question

proceed may You your with question.

Patrick Ho

can I on off maybe Thank much nice additional a you quarter. Power quarter, last think and you wins? other into end, getting very Solutions with on other congrats describe first semiconductor types the any talk John, side conductor you achieved that about call ratio. customers? the OEM space talked application aspect about etch with any wins high it, Can you of, you your

John Lee

Patrick. question, Good Yes.

don't but also that require power types talk too also more tools of So transitioning about we into complex, deposition power. difficult much, has power been And RF RF delivery. RF more

also a the now that's and share so Power great opportunity story. And becoming us for of a

VNAND, for So solutions. aspect different be have etch as -- dielectric of those power etch processes enabled will deposition we of high increasingly OEMs. I kinds can And we become important our more ratio, conductor the with RF in think have become certain position

growth. that's this takes area Patrick, positive for And semi. power another time, So for future in certainly RF but it's a

Patrick Ho

follow-up the helpful. my That's advanced as markets. of question And maybe Great. terms in

if side, consumer stabilization Motion electronics. solutions" a "Light and the electronics market? the at what's I the potentially to in for your turn past, and least device the markets And starting of about that talked target turning guess, when start device the would You've see they recovery. We're positive? consumer potential some effect trickle-down signs from

John Lee

a Patrick. It's good question,

more normally for potential frame. increase than starting Q -- -- the little With capacity. capacity normal a case to in you expected see down. there. we expect that then time flex customers, peak though a I time would QX saw now, as inquiries reported we're we cyclicality comment in And normal it when QX, would think cycle. what QX the respect to in normal occur our right in frame, ESI saw revenue, we to new I That's and they had that went the the asking

sell-through potentially Patrick, better instance, So for new I new that's think of tablets, a wearables. new reflection, of smartphones,

good a little setup good So and for a for I bit a think sign sign, XXXX. it's of potentially that's a

Patrick Ho

Thank very Great. you much.

John Lee

Patrick. Thanks,

Operator

comes Krish question with from Sankar next Our Cowen.

proceed question. may with You your

Krish Sankar

taking for them. Thanks of I question. Hi. have my two

will customers, since John, a just Korean to one, cap semi and Chinese guys from kind you your follow-up. catch China like point, have of First Then SMIC. you of require ship from gotten your happens it government letter looks with I'm a to too? customers U.S. I But U.S. to have to do a license curious, agnostic semi between also Japanese, vantage semi the some have of relations? cap Or and think you are your what eventually cap folks, up kind it

John Lee

to say, on as first on now, would Government we're our OEMs is all ECCNs to wouldn't not. that if that allowed we're to certainly are shipping I us, to allowed list. going respect follow Well, as those Krish, restrictions that's guidelines. And But entities and are globally. continue it whether the want following that with to to something well competitors, or that And on regulations that ship we'll right right And comment I changes, now, do. to

Krish Sankar

Got it. I guess, With the Solutions Solutions And question like, seems had a take it. and and Equipment off, PCB pretty be I smartphones still to of, revenue your on beginning the choppy. XG then Equipment kind to side, business. Got

point should because of the Or seasonality, several to you -- still the you wondering, next uplift? I'm kind of it's some at going over consumer choppy is a a little cyclical see think there be that electronic So still quarters?

John Lee

it's the season. the now just type as may Christmas phone where see could phone out, in fall, reports it just There are your useful. even not instance, potentially Yes, phone reports, And we cycle. would XG as spring, laser one electronics that a it they're read and are season, the cyclical. one build be need companies processing one more as in because say as for some HDI more more Krish, in view -- these releasing can But I thanks. still or out consumer of tools, it as today, drilling certain well tools, flex smartphone your releasing well as you certainly smoothing of not you very see I actually

still So kind seen. it towards less remains But that today, But would certainly drive that cyclical we see consumer the industry. electronics of cycle. a as to be

Krish Sankar

Great. Thanks, John.

John Lee

Krish. Thanks,

Operator

Our with comes Citi. from next question Amanda Scarnati

may proceed with You your question.

Amanda Scarnati

morning. Good Hi.

been anticipation more to on been unusual you're in from happening hearing that Just U.S. if even We've about on Can SMIC? sort bit seeing spare of you stocking you SMIC. have parts any talk little of might restrictions follow-up of up anything sort and the sales want components Government. direct that And to they've a there?

John Lee

Hi, Amanda. It's hard for us to say.

Our not China of is just to than is stronger China year and But the this through our last revenue OEMs. How SMIC, general, stronger certainly It's probably to in in stocking year. needs? of QX, majority it our direct than revenue goes even hard much tell. versus

-- of us for to whether and really or terms to somebody in else. going then that's hard tell it's SMIC So

So if a to bit us of be but tell. little I wouldn't surprised there's stocking, hard caution for in it's

Amanda Scarnati

of anticipation demand restrictions they that seeing pullback continuing that strong sort on year? week down to kind commented Are from are we as the earnings last a the the well. see kind Or leading you bit of of pare of on of next things U.S. because Okay. OEMs? other any their their in WFE just suppliers U.S. at in And to expect Lam by And earnings little had then Government. U.S.

John Lee

listened I I Lam commentary. the and Yes. well, heard as that call to

commentary our only semi I to strong. QX our I as think for is comment we Amanda, see can that the be make, continuing and is guidance

versus we fourth that. good don't quarter. our -- as don't I XXXX not out, continues that looking But good many the expecting at are going in really know or a pretty and guide customers a commentary, earlier XXXX. XXXX of said Whether the in So we

Amanda Scarnati

Thank Great. you.

John Lee

Thank you.

Operator

Jim Company. Ricchiuti & Our question Needham comes from next with

your proceed with question. You may

Jim Ricchiuti

Yes, I a couple of questions. had follow-up

Just higher which in regarding I'm to flex obviously, this When in inquiries launches, it orders? typically that have you the any flex you looks and wondering QX from content. just wondering I'm important the like anticipate PCB market? capacity what launches, this in late seeing alluded in better customers. how shipments Would you have some are drilling wondering, smartphone seeing business, -- do with these just of PCB pickup would you what QX? be I'm utilization the play sense And you're some out? increased

John Lee

Yes, good Jim, question. it's a

expect you our would earlier now the because flex inquires, to In ones maybe are I just there, really these hard good lot later, for that that's more cycle. high-end term, we're years. to in us like of these capacity in But So depends have the probably normally phone tell past but probably that term, really they're quarter. is a see terms probably And of year, some within the relative pull launches short inquiries in today peak the inquiries. just deliveries of it's point, usually And a It one, why your whether tools. And even the in is in QX past we'll getting seen reason recent those near as of to is on unexpected normal little Jim. a maybe would which are a the extra XXXX content. perhaps little they have of that we need bit it's these quarter years, know,

Jim Ricchiuti

to portion follow-up just and Light non-semi-related then And the business, Motion respect you're question Okay. some seeing a with that is nice of recovery.

defense. research, as to related the I'm of alluded You wondering, potentially sequentially, just COVID? some of was to this from catch-up some improvement closings

John Lee

and sciences the life that what But was discretionary. call Potentially, is I actually COVID. were some of some catch-up health procedures think we medical because because There growth Jim. the of

come become they period, back. COVID -- the they've During have

we as of it, pre-COVID. And -- there. is bit little catch not normal necessarily research, to seen have said, a there's it's then so catch-up And back we what just gone

market you growth are advanced if for So drivers, main those will, L&M, the Jim, non-semi, the quarter-over-quarter.

Jim Ricchiuti

business my less impression And you to Has was those exposure mentioned markets. industrial that had changed? that, Newport former automotive, that

John Lee

No.

because we but as used don't there consumer there market fiber laser than products have still we less we but exposure well. kilowatt I have business, around that the in have the portfolio think a are do we that exposure have Workpiece go electronics, of necessarily that

John Lee

Thanks. it. Got

Jim Ricchiuti

Jim. Thanks,

Operator

Benchmark. Mark Our next with Miller from question comes

You may proceed with your question.

Mark Miller

quarter. good the quarter, on another Congratulations

advanced as your that starting they as rebound, Does to your gross does becomes to that markets how grow, gross margin wondering, somewhat was markets impact margins? show Just lower if larger? some continue advanced

Seth Bagshaw

it's Yes, Mark, Seth.

proportion split levels, to Light advanced So are has advanced the pretty And average. corporate look don't and of a margins the L&M at above have I so sort the look we say by it's visual market. we the divisional at piece, that higher Motion markets. the Because fair of

So, would slightly it's higher. say I probably

they still look as you of well. But forward the volumes, of absorbed going a piece new impact. in the flex If being I now And have L&M have, margin kind at big tools business, flex as said capacity the good again, is our the E&S market. before,

I guess little better recap, but the to kind it's a corporate than basis so. substantially on average not bit So probably normalized of a

Mark Miller

design of You give a that optics. in you mentioned Can wins or color break bit little more in down wins? the terms more, little a some design

John Lee

Yes, our Mark, call process we these and for engineers a couple talented capex what hiring world-class of we've been investing optics develop now, years in to processes.

So optics are with customers. these wins several

you vacuum who tools developing to are other inspection, customers. kinds might be may a chamber. optically-based customers can there imagine, other But types that those lithography, attached normally be So of of even

well. other lithography as on so, broadening is And highly kinds specific metrology, it's customers focused to OEMs, still it and while of

Mark Miller

Thank you.

John Lee

Mark. Thanks,

Operator

next comes KeyBanc Capital. Twigg Weston Our from question with

You with may your proceed question.

Weston Twigg

power but could help revenue if business. is how wondering of on big, good good And have terms are a on the in handle growth contributing. honestly power really as big I year-over-year some narrow questions a this us There how you of down is triple-digit much and growth was band percentage don't sounds I

John Lee

of find if of Wes, at Yes, share, of where market that's look you'd third-party hundreds it. probably data you millions. It's kind

three it's leave the it triple reaching year. more, say is this triple-digit that. I'll would versus to digit. of integrating over So QX quarters year not frame. first find It's that's just last in certainly And go I the you But significantly time

So I'll it that. leave at

Weston Twigg

this as that Okay. That's you as with seasonality. the in double-digit PCB I seen not year familiar well? helpful. another like as on But there's drop over then sequential like, you expect expect, that we've PCBs, look market. that what years. revenue And similarly, couple what you looks I'm of QX, would Is into last percent some would know

John Lee

those real perhaps answers in turn by seasonality. Wes, more But Yes. towards what the earlier orders into of are the we turn we within of inquiries Normally, to for questions, some We're don't E&S. some that's that's tools. the the some expect. And But those guiding orders, of as kind we expected QX quarter, earlier perhaps with driven as said of and into I said, that of would respect the those smartphone normal seeing the demand. yet. normal know I And kinds to really --

Weston Twigg

really helpful. That's Thank Okay. you.

John Lee

Wes. Thanks,

Operator

Wells with Quatrochi Joe from comes question Fargo. next Our

proceed your You with question. may

Joe Quatrochi

for Thanks my Yes. questions. taking

share What's you been Power versus some the flat-ish. that XXX% just rebounded there market can better being Obviously, growth up a bit market being quite growth? year-to-date, is way the parse has On from gains? the business the any out, the from

John Lee

conductor gained etch. little markets Well, complicated share also I has. gaining think now share it's a NAND I in believe as we those if and like know you're gains can where because, And share well. some We we've particularly deposition grow be that obviously, we're strong. think But

there's Joe. So both,

And so is that in growing share spaces in the gain, because gain right share share growing. space the space, you're you're normally. just because and are And the taking that the

Power way would our that's characterize So growth. I the

Joe Quatrochi

to follow-up, guys this a acquisition as then And back Okay. had generation pre-ESI quarter cash cash good levels. you

that we on business mean, basis? run what's I of the to So level the do you cash about a need how day-to-day think right

Seth Bagshaw

Yes.

So this is Seth.

I So right. say would you're

we we of million to no there's a some at down this And right cash would high hit, good it kind but effort when to a line. in the We of less of the that be and have to I be than reason kind is say plenty the some there's pandemic to balance last business sort of balance earlier well the level. relatively But somewhere cash we quarter. in it's performed said little that of I line, I We really don't a mind $XXX-million-plus hunker conversion cash cycle. like that, number on The obviously, cash very to sheet. of at optionality now. million basis. a company the cautious. had probably exiting reduce regular kind level on we'd a We of sheet run hundred build probably would the plenty A bright hard to quarters. bright of would around things business. lot in level COVID-XX note That's couple run of It's $XXX need look execute how

Joe Quatrochi

Thank Great. you.

Seth Bagshaw

Yes.

Operator

[Operator Berenberg. Misra from Paretosh Instructions] Our next with question comes

with your may proceed You question.

Paretosh Misra

what in Thanks. Any Good vacuum could Vacuum you morning. pieces are that I reactive your Power color the revenue on like great. the I if color to just wanted would more of some business, on to go generally, biggest back and be Analysis the guess, And power, current question earlier. give mix gases? more

John Lee

John. is this Paretosh, Yes,

So our and portfolio flow power Vacuum pressure of plasma business, are our also and pressure but vacuum drivers, control. big valves, of and Analysis

vacuum. components they're of over together, $X semi our large for so all And components business billion

So rest But is you well. of been growing Power we of it has growth. certainly, the split quite the portfolio took out, a also But don't the big really driver if out. Power

As XXX% of XX% the year-over-year over well. out, we're as we Seth you portfolio factor Power it, that well and And semi. of Power in as said, the XX% we're even rest said, if is But of growing. that

Paretosh Misra

it, a Got it go $XX just right could to the comments us then world-class than now? I big Or as Is business already back it. or follow-up, could that is give Any million million like, sense bigger if that? optics. And $XX to is how you annual? range quick about

John Lee

I million. of is would metrology $XXX say OEM that comfortably our business business in types lithography, over

just So said. bigger had you it's what than much

Paretosh Misra

John. Thanks, it. Got

John Lee

Thanks, Great. Paretosh.

Operator

call not would Thank the you. at like to this any And to any I I'm over back questions now remarks. turn time. further Lee John further showing for

John Lee

Again, interest very And in forward XX. and join MKS. virtual us us on today you our Day we having your thank December joining look you you operator. thank much, to Well, for Investor at for

call, You may close the please.

Operator

and participating. conference concludes Thank for Thank you, ladies you this call. today's gentlemen,

now may You disconnect.

MKS Instruments (MKSI) 28 Oct 202020 Q3 Earnings call transcript