Ladies and gentlemen, thank you for standing by and welcome to the Brooks Automation Q3 Fiscal Year 2017 Financial Results Conference Call. [Operator Instructions] As a reminder, this call is being recorded, Wednesday, August 2, 2017. I would now like to turn the call over to Lindon Robertson, Executive Vice President and Chief Financial Officer. Please go ahead.

Thank you, Ash, and good afternoon, everyone. We would like to welcome each of you to the third quarter financial results conference call for the Brooks fiscal year 2017. We will be covering the results of the third quarter ended on June 30, and then we will provide an outlook for the fourth fiscal quarter ending September 30 of this year. A press release was issued after the close of the markets today and is available at our Investor Relations page of our website, www.brooks.com, as are the illustrated PowerPoint slides that will be used during the prepared comments during the call. 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 actual financial results or other events to differ from those identified in such forward-looking statements. I would refer you to the section of our earnings release titled Safe Harbor Statement, the Safe Harbor slide on 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 made no obligation to update these statements should future financial data or events occur that differ from the forward-looking statements presented today. I would also like to note that we may make reference 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 that these non-GAAP measures provide an additional way of viewing aspects of our operations and performance. But when considered with GAAP financial results and a reconciliation of GAAP measures, they provide an even more complete understanding of the Brooks business. Non-GAAP measures should not be relied upon to the exclusion of the GAAP measures themselves. On the call with me today is our Chief Executive Officer, Steve Schwartz. We will open with his remarks on the business environment and our third quarter highlights then we'll provide an overview of the third quarter financial results and a summary of our financial outlook for the quarter ending September 30, which is our fourth quarter of the fiscal year 2017. We will then take your questions at the end of those comments. During our prepared remarks, again we will, from time to time, make reference to the slides I mentioned available to everyone on the Investor Relations page of our Brooks website. With that, I’d like to turn the call over now to our CEO, Steve Schwartz.

Thank you, Lindon. Good afternoon, everyone, and thank you for joining our call. We're particularly pleased to announce the results from a very strong June quarter in part because the results that we’ve delivered, but more importantly because we’re able to demonstrate the earnings power of our business, which is made up of a portfolio of strong market leading technology positions and key growth segments of the semi-conductor and Life Sciences markets. A foundation that we strongly believe will continue to deliver going forward. Revenue at $182 million was up 7% from March and up 23% over the prior year. Gross margins increased sequentially by 100 basis points to reach 40%, which is a very meaningful threshold for the company, and a heavy lift from the 32% to 33% gross margins we delivered in fiscal 2011, the year we first entered the Life Sciences space and began to restructure our semiconductor product portfolio. The top line and gross margin performance led to a non-GAAP earnings per share of $0.36, more than double what we delivered in the June quarter one year ago, and up 27% from the March quarter. Growth came from both segments as we delivered our eighth consecutive quarter of growth in Life Sciences and semiconductor, which is riding the wave of strong momentum in the capital equipment space, also benefited from our expanding market share position in our key growth segments. The part that we find most energizing is the momentum that we’ve established inside the company to continually ratchet down on costs and improve efficiency, while we advance new product development and sales activity to deliver top line growth. We continue to see more potential and that’s what drives us even harder. Today, we report on some of the highlights from the quarter and give color…

Thank you, Steve. Please refer now to the PowerPoint slides available on the Brooks website under our investor relations tab. To start the remarks, I would like to draw your attention to Slide 3, which is consolidated view of our operating performance. Our top line revenue increased 7%, sequentially to $182 million, driven by an 8% increase in semiconductor solutions, and a 6% increase in Life Sciences. In the GAAP results, operating income expanded 27%, driving GAAP based earnings per share upwards $0.05 to $0.25 per share. Looking at the non-GAAP picture, adjusted earnings per share was $0.36 per share, an increase of 27% from second quarter. Non-GAAP gross margin increased 100 basis points to 40%, driven by improvement in the semiconductor segment. At the bottom line, we produced 25 million of non-GAAP net income and 37 million in adjusted EBITDA. Comparing these results on a year-over-year basis to third quarter of fiscal 2016, revenue was 23% higher and our adjusted EBITDA has increased 93%. Turn with me over to Slide 4 to start our discussion of segment results. The Life Science business grew 6% sequentially and 26% year-over-year with $37 million of revenue. BioStorage revenue increased 9%, sequentially, while the remaining core Life Sciences revenue grew 4%.Gross margins came in at 38%, 2 points lower than the prior quarter. Softness occurred on both the storage and the infrastructure business. On the BioStorage services side, the result was driven by mix as genomic services revenue came in higher. Storage service margins remained very strong. On the infrastructure side, the business had certain projects driving a lower margin this quarter. We expect margins to return to 40% next quarter. In the third quarter, new orders in contracts totaled $42 million adding backlog to the business. Year-to-date, Life Science bookings totaled $154…

[Operator Instructions] And our first question comes from the line of Paul Knight with Janney Montgomery Scott. Your line is now open. Please proceed with your question.

Hi Steve, could you put some color around the equipment versus the service size, the revenue in the quarter and any attributes on why maybe a little softer, was it capital equipment? And then lastly, the Pac bio deal was closed, correct?

The Pac bio deal was indeed closed. So Paul let me give you a little bit on the quarter. So out of the 37 million, I'm going to give you a really rough numbers, the stores was about 20%, a little bit more 25%. The consumables and instruments was probably about 15%, and the bulk of the business was the services and the service combined. So when we look at the bio storage and service combined that was about half.

Okay. And then you are offering genomic services as part of your strategy obviously, is that your fastest growing business?

It turns out that all of the elements are growing pretty significantly. The genomics is a little bit, is not as steady. In the aggregate it is growing, but the samples that we provide to that are growing considerably. So that’s a business that’s still up and down for us, but year-on-year we’ll see growth in the genomic services, but we find the activity there is sometimes budget -related and so there are bursts in that business, more so than the steady annuity that we get from the consumables and from the storage elements.

And you’ve been posting somewhere in the 20s on organic growth, do you see that as a number that’s ahead of this?

We do. So for the foreseeable quarters we see that continuing to grow in the 20% plus range.

Okay. Thank you.

Thanks Paul.

Our next question comes from the line of Amanda Scarnati with Citi. Your line is now open. Please proceed with your question.

Hi thanks for taking the question. Just continuing on the Life Sciences business, Steve I think you mentioned that profitability could be greater than semi down the road, and what are the puts and takes to get there, is it adding more scale into the business, is it continuing to integrate the acquisitions that have been done or are there other things that are already in process that are helping to drive profitability up.

Sure Amanda. Lindon and I will share this with. So Lindon will start and then I will follow-up.

Yes, Amanda it’s a good one because this has been our focus, not just current period, but over the last two years, three years, as we build up the Life Science business. We, last year, just about this time, we outlined our 2019 model. We said that our operating margins for the Life Science business would probably crossover and be stronger than our semiconductor business and 2019. We still see that very much on track and the way acquisitions would hold into that is to accelerate it. Let me make the point. So you are seeing our semi business still being about 80% of our revenue in Life Sciences being 20%, 21%. On the current guidance, I think - if you do the calculation roughly, Life Science will probably tip up to about 23% 24% next quarter. And Life Science has the continuity of growth, as continuity of growth over the long term. Not that semi doesn't, we think semi does this well on the long term, but the Life Sciences will be able to sustain this 20% level growth. Our investments that we alluded to in the call is, we’re being very steady and deliberate on investing, but you will also notice that our investments do not exceed our revenue growth. So, as we expand our revenue base it positions us to strengthen that model, we’ll gain leverage, and as we put into our model we think we’re headed to something that’s between 16% to 19% operating margins, and we believe longer-term this business will exceed 20% operating profit on the Life Science side.

And Amanda, just to put a little bit Dusty has got a pretty significant pipeline of opportunities, things he is looking to add to the company, and so when we look at the opportunities to add consumables to acquire more samples that are under management there are synergy benefits that we will get by building out scale there. In addition a pretty significant part of the growth portfolio from this point forward involves Informatics and that’s a high margin capacity, high margin capability that will be kind of a more meaningful part of the portfolio. So we really do have high expectations and a good roadmap for the expansion of the profitability in the Life Sciences business.

And another question I have on the Life Sciences businesses is, what percent of current revenues did you have in the quarter and has that changed at all with the Pacific Bio acquisition?

The Life Sciences as a percentage of total?

The recurring revenue.

Recurring revenue.

Oh, recurring revenue. So we’ve been running just about two-thirds. I think in this current quarter it’s just under 60%. So it's puts and takes. Genomic services we said tipped up to a higher number, and we don't count that as recurring, it comes up and tips up, tips down and it’s very much on a current quarter purchase activity. So we're just under 60% in this quarter.

And the PBMMI part will bulk up on the recurring revenue portion.

Okay. And then one more question if I can sneak it in on the semi side, in terms of the automation growth, are you still seeing a lot of robust shift into more outsourcing or outsourcing towards Brooks in terms of building up the automation tools?

Yes we do. So, we’re continuing to gain share in the automation space. We have a really high market share in the vacuum automation and the advanced packaging is what’s really brought some of the complex atmospheric automation to bear. So we’re continuing to get OEMs outsourcing more automation to us. Again critical, but not core capability and we as a very strong provider are winning more both new designs and what they ultimately outsource from the standpoints of, even when they have an existing internal robot when they refurbish a platform often we’ll get that vacuum robot to a tool that might have been already a product for 10 years.

Perfect. Thanks guys.

Thanks Amanda.

[Operator Instructions] Our next question comes from the line of Craig Ellis with B Riley. Your line is now open. Please proceed with your question.

Hi guys this is Peter [ph] calling in for Craig. Thanks for taking our question and congratulations for the strong results. So the first question I have is, just, your customers talk about a relatively flat half on half, is this kind of what you're seeing as well?

Yes. Peter that’s what we’re seeing because that’s what our customers are guiding us toward. So, for sure we had a strong first half where we have a little bit of a pause in September and it’s a little bit early for customers to give us firm orders, but they’ve given us strong indications about how we ought to be prepared for December. So, the announcements they make on their calls are very consistent with what they are also telling us.

Okay. And then just want to touch on the service. You know some of your customers talk about this being a stable, mid-single digit to high single-digit kind of growth segment, how do you kind of think of service, or how should we kind of think about service?

On the semiconductor side, Peter which I think you’re referring to, we see this as one that is the follow-through in the insurance for Brooks' quality of delivery and service to the fab behind the products we shift most directly to the Fab and through the OEMs. So, we have initiatives and partnership with our customers, as well as directly with the end users. So, we continue to see this as vital to us. It’s a more stable factor because it’s driven off of the installed base then it is on the current period financials, which when you're in a high growth this is more stable than the top line. When you’re in a cycle down it’s more stable than the drop. So, we like that aspect of it. So it’s a key part of our model. I would tell you that right now we’re seeing expansion over the last two quarters in our services line, and we’re happy about that. It’s obviously a reflection on our customers turning to Brooks.

And then moving to Life Science, you talked about the, you know getting the order for the bio study, could you guys, kind of elaborate on what the opportunities set for that could be?

Sure. The BioStudies platform is really a foundation for how we help customers to manage their samples, and ultimately manage their workflows. So, the samples the value of the samples is already extremely high. The value of a sample that’s fully annotated and have data associated with it is even higher and the complexity for our customers to try to do that over a global network of different labs and research facilities and storage sites is extremely complex, but it is the nature of the core of our business, as we manage multiple, you know hundreds of customer samples at various sites and the fact that we can bring this Informatics platform to the customer adds tremendous value to them and in some cases actually, Peter we’re helping customers to discover samples that they may not have known they had. And I think that’s where we find that there’s a really good starting point, the capabilities that we build on to that related to things like consent management are extremely valuable and extremely important and that’s what is being built out in the BioStudies platform, but first and foremost what and where, and ultimately quality, ultimately data that goes with the samples will be part of that offering.

Okay. And one final question, just on the gross margin the 40% is at the target model, what are some of the levels onto seeing that and what could be driving more upside?

So specific to Life Sciences first, we get a lot of questions on the Life Sciences model, and what I would share with our investors is that we see our business being really steady around the 40% range right now, and that’s made up of our storage services business around BioStorage PBMMI being around 40% to 45% and our infrastructure or the rest of our core of our Life Science business being somewhere between 37% to 40%. And so I think on any given quarter, you should expect 40% write-now. I will tell you in advance, while we think it will strike 40% now, I expect that when we get to the December quarter we will caution you on that because it will have a higher genomic services business content. So it will move between 38% to 42%, I think, in the near-term. But longer term what I think moves this business, one, is the things that we always focus on. First, the product value, we keep innovating and we keep adding new products. Steve gave you examples of the new store systems that we’re shipping, we’re seeing - we’re starting to see the ramp of the B III cryo system. We’ve got some new offering and innovation behind our consumables business out of FluidX and of course we’re seeing a consolidation of customer opportunities around the cross sell of our offerings, which has synergy in itself without having to add infrastructure cost there. So the leverage is well. So first product value, we’ve continued to take cost out. We have items in motion now to continue to improve our reliability and reduce our cost and then finally the leverage of the size and so all of these will move us up the ramp on gross margin. I think as you - again when we look towards that 2019 model, our target is 43% to 45% on a consistent basis there. And when we do an acquisition, we stay focused on this and look for something that fits that model, and is aligned with that objective.

Great. Thank you.

Peter thanks very much.

There are no further questions queued up over the telephone lines at this time. I will now turn the call back to Mr. Robertson.

Thank you Ash and we really appreciate all the time that our investors and our analysts spend with us, and we look forward to getting a chance to touch base with you this coming quarter during our open part of our communication season and we’re really enthusiastic about how this fiscal quarter is going to wrap-up, and we look forward to talking to you again this time next quarter. Thank you very much.

Ladies and gentlemen that does conclude the call for today. We thank you for your participation and ask that you please disconnect your lines.