Ladies and gentlemen, thank you for standing by. Welcome to the Brooks Automation Q2 2018 Financial Results Call. During the presentation all participants will be in a listen-only mode. And afterwards we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, Tuesday, May 1, 2018. I would now like to turn the conference over to Lindon Robertson, Executive Vice President and CFO. Please go ahead.

Thank you, Scott, and good afternoon, everyone. We would like to welcome each of you to the second quarter financial results conference call for the Brooks fiscal year 2018. We will be covering the results of the second quarter ended on March 31st, and then we will provide an outlook for the current fiscal quarter ended June 30, 2018. A press release was issued after the close of the market 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 make 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 the 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 second quarter highlights. Then we'll provide an overview of the second quarter financial results and a summary of our financial outlook for the quarter ending June 30th, which is our third quarter of the fiscal year 2018. We will then you’re 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 are pleased to be able to have the chance to update you on the results of another strong quarter. In our Q2 growth and increased profitability remain the themes with revenue of $207 million up 9% from the December quarter and 22% from last year. EPS increased to $0.40 per share and bookings in the quarter were $238 million, with Semiconductor contributing $184 million and Life Sciences again above $50 million at $54 million. We forecast more growth ahead and as you’ll hear from us today innovation, new product development and value added acquisitions continue to be the fuel that’s accelerating our success. Although the stock market has been volatile of late due to uncertainty in the semiconductor supply chain, we could not be more secure in our strategy. We are gaining share with a strongest players in the market and in technology sectors where we add high value. In Semiconductors artificial intelligence, cloud computing, big data initiatives and 5G are technologies that are driving the tremendous Semiconductor storage and computational needs of the data economy. It’s the breath of applications that include memory and logic that are propelling an expansion in capacity and a new threshold in wafer fab equipment spending that’s unprecedented and may indeed be sustained. We are bullish about the long-term drivers in the Semiconductor industry and we believe our critical technologies are proving to be enabling the necessary capabilities for OEMs and end users, who will lead in these markets. Similarly in Life Sciences, we are seeing the steady increase in our opportunity related to sample management and measurement as high quality biological samples are the keys to cures for the most serious diseases facing the human race. We believe this…

Thank you, Steve. Please refer now to the PowerPoint slides available on the Brooks website under our Investor Relations tab. We begin with slide three, which is a consolidated view of our second quarter operating performance. Our top-line revenue grew 9% sequentially to reach $207 million. This brings us up to 22% growth year-over-year compared to the second quarter of last year. Both segments drove the growth. Sequentially, Semiconductor Solutions expanded 12% and Life Sciences expanded for the 11th consecutive quarter with 2% drove. On a year-over-year basis, Semiconductor grew 18%, while Life Sciences increased 40%. In the GAAP results, diluted earnings per share came in at $0.95 in the second quarter. We had $46 million of benefit on the bottom-line from reversing the valuation allowance reserve, which have been recorded against our deferred tax assets in the U.S. in our 2016 fiscal year. I fully acknowledge that this change in reserves provides more of an optics change than an economic earnings event in the quarter. However, I want to highlight the underline drivers in determining the release of the reserve. First, it reflects a turnaround in the cumulative profit results in the U.S. over recent years versus the cumulative loss position the company had accumulated in the years leading up to the reserve being booked in 2016. Second, it reflects confidence in our outlook to generate U.S. profits going forward and our ability to utilize the deferred tax assets. Finally, I will share that we arrived at this conclusion prior to applying impacts of the U.S. tax reform and then gained further confidence after considering the potential impacts of the tax reform. Now let’s address the primary dynamics of the P&L as we look at the non-GAAP results on the right side of the page. Non-GAAP gross margin came…

Thank you. [Operator Instructions] Our first question is from the line of Farhan Ahmad with Credit Suisse. Please go ahead.

Hi, thanks for taking my questions. My first question is on the CCS business it’s actually a little weak recently. Can you just talk about, how we should we think the growth in CCS going forward and what are the main drivers that will accelerate the growth for CCS?

Can I just make sure I am understanding Farhan, which business you are referring to?

Contamination control.

Yes, okay. So contamination control is in the semi business and it is underneath our General Manager, Dave Jarzynka. And we do continue to have much optimism there. I am going to comment initially, I’ll let Steve chime in here. Last year in 2017 it had reached $84 million and that was up from $52 million in the previous year. While it’s still down we have been talking and we continue to see the demand picking up here in the second half it picked up in the second quarter modestly, in the third quarter and fourth quarter we expect it to continue. Whether we make it all the way to a growth year still remains to be seen on what investments are determined by the fab, but we think that we’re in the hunt for another solid year.

Got it. And then in regards to your Chinese and Korean equipment suppliers can you just talk about how much of their business is coming from sort of the newer equipment suppliers in Korea and China and how do you see the trajectory of that growth going forward?

So Farhan, we got the Korean equipment makers now for quite some time. A lot of the Chinese equipment makers are relatively new so I’d say in the last two to three years. But what we see is that as they get more capability they win more of the process steps. And so the volumes generally are increasing and also there’s a lot of enthusiasm as you can imagine around some of the opportunities that exist in China where some of the equipment makers are putting some pretty significant forecast out there.

Got it, thank you that’s all I had.

Thanks, Farhan.

And our next question is from the line of Edwin Mok with Needham & Co. Please go ahead.

Thanks for taking my question guys. So first just quickly housekeeping Tec-Sem you said there’s $0.01 impact is that just for GAAP or both GAAP and non-GAAP? And can you just roughly tell us how much the two acquisitions -- how much revenue the two acquisitions add to your June guidance?

Yes, so this last year the estimated revenues was about $13 million on a GAAP basis and we ended up paying approximately $14 million after netting down the working capital. Not all of the payments made because as we shared at the press release time, we first acquired 93% from primary holders we still have about 7% closeout with minority holders. In the guidance we’re careful on this. We do have good orders, that we have visibility too, but with the experience that we’ve had being limited. The run rate of about $3 million a quarter or so I think is the right expectations about what we have folded in.

And then the $0.01 impact is that just some lower margins business overall or it’s just on GAAP results guidance?

Yes, I'm sorry that’s a non-GAAP dilution point of about a penny and I would expect -- I will go back to the amortization after the Q and it will be spelled out for you there. But Edwin our expectation is that as we move through this quarter we’ve got some integration to do. As Steve mentioned the approximate location of this is really close to our CCS business in Germany. And so we see some synergies and some opportunities there and there’s good opportunities. So by time we get to the fourth quarter and we do see demand ramping in the near-term and with that demand and with our integration activities you’ll see it become accretive on a non-GAAP basis.

Great, that’s helpful. And then just kind of sticking with semi, I think your guidance at the midpoint even backing out the growth in CCS it seems like you guys are suggesting that your vacuum automation business can still continue to grow, we’ve heard all that you heard from some of your large customers talking about kind of lower levels NAND spending in the coming quarters just curious what’s driving the growth in the June quarter and how do you kind of see that business go on beyond the June quarter?

Yes, Edwin, we’re also a little bit curious because we’ve heard mix results, but the order book is pretty strong and some customers are still more bullish than others. And our order book remains one that gives us pretty high confidence in growth again in the June quarter. So the bookings are strong and the demands for customers at least over the next months are pretty solid. So we’re busy and it’s a little bit surprising to us that we have probably the biggest variance we can remember in a while amongst the various OEMs, but we're pretty confident about at least what the next quarter looks like and especially in the vacuum automation side.

Okay, great. That's extremely helpful. And then kind of just quickly on Life Sciences you guys did this acquisition of this Canadian depository and then since like you guys are doing some work in Europe. I'm just curious, is geographic expansion a big driver there, I remember those of your example storage capability there has been based in U.S., is that correct and there is all the room to expand into international sample storage opportunity?

That's correct, Edwin. So, basically it was an opportunity that came up because we happen to be a real really good buyer of repository in Canada. It's not all Canadian samples, they have a storage facility in Pennsylvania. And as a matter of fact even in Indianapolis in our European sites, we have samples from at least dozens of different countries in anyone of those sites. So, irrespective of where the bio storage -- bio repositories are. The samples are from all over the world. And that's pretty consistent with the model and you'll find that in almost any size bio repository they have samples from many countries. So geographically, it's a benefit for Canada because I think about half of our customers are Canadian customers, but only half of the customers were Canadian customers.

Okay, actually that’s helpful. One last one if you don’t mind me squeezing in, just I remember a lot of talk about compound pile of storage equipment or store that you guys have talked about before. How is that progressing?

The chemical compounds in -- let me comment on this, if I'm understanding your question, I think you’re asking are we progressing in storing chemical compounds. In general the development is…

Yes, let me just correct, I'm talking about lower temperature sample storage equipment that you guys have talk about historically are you guys are trying to grow in that market?

Yes, so, bio storage free trial. So, that's at the cryogenic temperature. And we keep making progress there, we did another million dollars in the quarter and again that's at a pretty low level, but consistent with where we've been, a little bit up from last year. But this is really steady slow progress and we win those one customer at a time on the automated systems. I think on the last call, we did talk about two pretty good size installations that will go in toward the end of 2018, early 2019 where we actually provide some automation that to fully automate these cryogenic systems that connect them together. So, we're really bullish about the opportunity. And this one continues to be at a slower pace than we had anticipated, but steady as we forecasted for 2018.

Okay, great. That's all I have. Thank you.

And Edwin, I mean a follow-up on your question now I was able to confirm, but the extra amortization step up in other costs that would be in the GAAP results related to the acquisitions would be about another $1.2 million on a GAAP basis. So, while we said it would be about a $0.01 hurt on the non-GAAP, it would be about another $0.015 round numbers on a GAAP basis.

Great, thanks for clarifying that.

We've a question from Craig Ellis with B. Riley FRB. Please go ahead.

Yes, I'll start with just a housekeeping question looking back and clarifying and issuing my model for the reported quarter. Lindon, I know you mentioned the segment operating expenses, but I missed those, so can you just walking through what drove the sequential increase in OpEx in the quarter?

Yes, with the accelerating performance, one item is the accruals of variable compensation and when we talk about variable compensation, this isn’t really cash in an executive it's across all employees, all employees participate in a variable compensation. So, we’ve taken the accruals up and when you see the acceleration of the annual performance the middle of the year, and you increment that you are picking up the year-to-date adjustment for this current year. And then this second element as we had some professional service expense that we incurred in the quarter. So when I would highlight about this is while the variable compensation accruals will to some degree provide some continued expense in the second half, not on a catch up basis it will level out a little more. It wouldn’t be weather structurally other than on a par performance here, so right, so which we are already accruing. And then on professional expenses we also don’t see that as being a structural add to the business.

And is the accrual driver revenues or gross profit dollars or operating profit, what’s the driver to the accrual trigger?

It’s largely the operating profit as well as revenue growth. And that’s on the cash based. When you go to the long-term you’d see the executive plan shift more to an ROIC weighting including the operating income as well, but the heavy weight. But in these accruals that I am referring to it’s on the current year, which is operating income revenue and of course gross margin is in there.

Thanks. And then Steve you mentioned in your prepared remarks 28 Semiconductor segment design wins in the quarter, which was an unusually high number, I don’t recall you’re mentioning that data in the past. So can you us some context around where that number might have been over the last four quarters or so? And was there any particular segment of the ones that you talked about whether it’s vacuum, robotics or CCS or advanced packaging that really stood out in terms of generating all those design wins?

Sure, so Craig just to give you, this is a metric with very specific targets that we set out at the advance of every year. So the account teams and the engineering teams are aligned on the ones that we consider to be really important. Of the ones that are on our list that we did 28 design wins, 21 were targeted at the beginning of the year and some just come along and we’ll take them, but they may not have been as strategic. So the historical average for us is about half of that. So just to give you an idea in a typical quarter 15% to 17% would be pretty normal. And so to double it in a quarter is pretty outstanding. It’s something we used to report on the call years ago and back then it was in that 15% to 17% range too. But it’s a deliberate -- there is a deliberate set of wins that we set out to achieve and we kind of -- we had a really unusual quarter and a real testament to a lot of the capability. And on the terms of the of the wins, we think it’s really important to make the same presence in CCS in China that we have in the other regions. And so, we are not sure at what rate the expenses will take place, but we want to be there and we want our tools in those fabs because we also think that the model for some of the foundry activity is going to be what takes place in Taiwan. And so we want to make sure that we don’t just get design that we participate in all the volume that comes too. So 11 CCS wins in China is a huge accomplishment for us in the quarter.

Yes, that is and congrats to David’s team overall for the performance with the design wins. Connecting that activity in your comments that that really lent confidence to the businesses performance in 2019 and some of the comments about very near-term dynamics, you enter the quarter with strong backlog performance. Can you comment on the visibility that either do or don’t have for the back half of the calendar year? How is it looking for you and are there any other parts of business that would stand out CCS, advanced packaging, vacuum automation, et cetera?

So across the board, Craig -- across the board the indications we have were strong we really get orders ordering in advance, but all of our customers give us an indication to make sure that we’re ready especially in these days when the supply chain is really tight. So the indications and the request for us and the audits on us to be prepared are pretty significant they would indicate that there is continued strength in the back half of the calendar year, but again anything can happen. And so we remain confident about what we hold orders for. But by and large the health of the backlog and the pressure from our customers give us an indication that at least readiness is the order of the day. So that’s about all we can say, I wish I could be more concrete. You can tell a little bit from the bookings again that people want to make sure that they are in the supply chain with claims to product, but again I think that’s going on probably across the industry.

Got it. And then lastly, I am not sure if this is for you or for Lindon, but there is a reiteration of the 10% operating margin target for the Life Sciences business and I think from the most recent quarter our gap there is about 350 basis points between where we’re now in that 10 percentage point target. What are the things that really close the gap, how much of that is either organic revenue growth or inorganic revenue growth or just gross margin expansion in closing the 350 basis points objective? Thank you.

Yes, so I think you kind of see the balance of it come through a split of gross margin and operating expense leverage. So we still have progress to make in the gross margin and this is partly in the costs of our footprint and operations as we consolidated in Manchester. By the way we made substantial progress over the last two quarters. We’ve made it in two what I would call half stuffs to get to here thus far in the manufacturing costs of the operations in Manchester so they’re doing a great job in progress. And we still have a list of opportunities to close in on. And then similarly we’ve got operating expense as we described before we’ll yield some out of that in terms of holding our investments flat and continuing to work our integrations into the mix of what we have for efficiency. So you’ll see I believe the 3.5 point to be roughly half shared by the time we get to fourth quarter between gross margin and OpEx leverage.

Thanks for that, Lindon and good luck guys.

Thanks, Greg.

We have a question from Paul Knight with Janney Montgomery. Please go ahead.

Hi, Steve. Hi, Lindon. Could you talk about the BC3 uptake in kind of the capital equipment side of the Life Science business as kind of how it ramped up in the quarter?

Yes, so the BC3 again makes steady -- we’re making steady progress there, Paul what we’re finding is that there’s a lot of a valuation that goes on when people take a BC3. So takes a considerable amount of conversation, but when we find customers take a B3C they don’t go back and buy a manual tool. So this is one that’s really encouraging for us. And on the larger automated store side that was a really healthy quarter for us, it was up 25% year-over-year and it generated about $9 million of revenue. So between the B3C around $1 million and automated stores around $9 million it was a pretty healthy quarter for us. Again we’re going to continue to focus on the B3C, there are customers who absolutely want that technology and just the need is a scientific one right now, but it’s not like a huge volume driver. But we are accumulating the right kind of customer base and we supplement that with the cryo carrier that we have and the filling station allows them to not just store the samples in an automated system, but also transport them through the facility at safe cryo temperatures.

And Steve, with the BioSpeciMan acquisition what are your number of physical locations now globally? And is it making the sales cycle easier, I mean, what is it doing for you guys to have a network that is probably not matched by anybody else?

Yes, so we have six sites right now. Paul what happens is it gives customers who think they need samples close-by, it gives them comfort to put them into a rather local bio repository and after we have the sample for a number of years they are very comfortable moving them to another location. So it give those economies to put them into a more economical site. But in terms of winning business the proximity does seem to help for first time wins on the business. So we’re a 6 right now we’re going to continue to do some consolidation we talked on the last call about another site that we’re building for a customer very close to a customer. And that’s an important one for us. So you may see us when there’s a site with -- that has enough economic advantage that can be large enough that we may put them close to customers here in the near term. But again we have to drive economies for it. And so we’ll always evaluate each one case-by-case. But 6 now going to 7 and we’ll make it probably back to 6 by the time we get to a year from now.

And then lastly can you compare or contrast this quarter with the December quarter in terms of customer interest demand on bio storage and services?

Again I think the demand continues to increase. We see a steady increase in the amount of outsourcing. We are not very specific about the sample count, but you can imagine we added somewhere around a million samples from existing customers in the quarter and that’s a really good quarter for us. And we’re going to continue to build that way, but what we find is more and more the customers are very comfortable with outsourcing and they are making that asset decision and we continue to see the trend building. So we’re really bullish the fact that we had 28% growth in bio storage business. We think that’s the path for us going forward.

Thank you.

We have a question from Amanda Scarnati with Citi. Please proceed.

Hi, so a quick question on the Semiconductor business. As you look at the linearity of the orders throughout the quarter, I know it’s a really strong quarter in terms of orders. How did that progressed was there a bigger push later in the quarter or was it sort of evenly spread out?

Got you. Amanda, it’s relatively linear, I mean, we see bigger weeks and not, but we look at the data once a week and what we see is a pretty steady pattern. So when we were -- I give an example four weeks into the quarter we were on a trajectory to end up about where we ended up. And so it was pretty steady through the quarter, but that’s something that happen to us it’s not something that’s a normal pattern necessarily. But generally we had an indication -- in this particular quarter, we had indication from the start that it was going to be a pretty good size quarter. But we’re never sure until the last week of order taking.

And then on the Life Sciences side, if you continue to add the smaller storage companies that have locations in various places around the world. Is there an opportunity to gain additional margin scale, or is it difficult to take out costs as the storage facilities are kind of spread out?

So to give you an example, we’re looking at the means by which we put the samples in the most economical place right now. So what we can do is as we begin to fill a site there are some samples that are truly archived that can be moved to less expensive sites and if customers need some nearby we’ll empty space in a bio repository maybe move those samples to Indianapolis and free up space at a regional site for the customer. So that’s a daily activity that Dusty and his team go through and it’s -- we make sure that when we go to pick up a buyer repository that it’s a good margin business, if it’s a business model to begin with. But then there are things that we can do in terms of making good decisions about adding additional storage capacity, we always want to put that in the place where it makes the most sense. And right now Indianapolis is one of the best sites that we can imagine, and we still have a lot of capacity in the Indianapolis. But the margin of the business is really good, [the way Dusty] and his team manage it for long-term growth -- good long-term profitable growth in this business.

Great, thank you.

Thanks, Amanda.

We have a question from Drew Jones with Stephens Inc. Please go ahead.

Thanks, guys. Just one for me, looking at the 10% op margin metric that you talked about to exit the year on, and Lindon you’ve kind of mentioned the possibility of scaling back some investments spend in the fourth quarter to get there. Are there any growth opportunities that could be impacted or restricted from that sort of cost containment just to get to the operating margin bogie?

No, and I appreciate the question because what we’ve said is Dusty and the team will be making some specific pockets of investment, but they will also be realizing some savings and efficiencies out of our other areas. In large part the sales structure the team is in place to deliver through this year and even going into next year. And so that’s why we have confidence that as we grow we’re not going to be adding expense structure. But under the coverage there is still a little bit coming out and going in and we’re not sacrificing top growth opportunity for expense savings here.

Thanks guys.

Drew, thanks very much.

[Operator Instructions] And we have a question from David Duley with Steelhead Securities. Please go ahead.

Thank you for taking my questions. Congratulations on nice results. A couple of questions for me, as far as this new acquisition. I guess, Tec-Sem, could you perhaps take a stab at what you think the size of this market is going to be in a year or two or help us understand what the potential market opportunity is?

So Dave, it's a really good question. I think if we put a peg on this one, we guess that this is a $30 million opportunity that could grow to $50 million here in the next few years. So, it will depend on the product that we've put together in and around EUV. We know about the size of their reticle storage market probably around 30 today and we feel really good about that. And again depending on the amount of acceleration we get from the EUV site that will determined how big and how fast this can grow.

Okay. So, the market expansion is mostly EUV driven?

The incremental market from today, that's right. Because the Tec-Sem team has a really strong presence in the radical management market today and we think that additional growth will come from the products that we develop in and around EUV. We have the EUV carrier cleaner already in the CCS business, but we think that the value and the complexity of handling the reticles for EUV might bring us other opportunities in terms of how those reticles are stored.

And that leads me to my next quarters as far as the Brooks cleaning business, what impact does EUV have on that business does it expand the size of that market?

We don't anticipate that it would expand the size of the Brooks cleaning business, that will be a volume and process step driven capability, but I don't have a good assessment of that yet, David, it's good one for us to think about but we don't know why it would necessarily change meaningfully. I will tell you that the impact of the iron implant for example on the photo resist process does cause different contamination that people make sure to clean the wafers and clean the fop and I can't say that we know the impact of EUV on something like that yet.

Okay. And then as far as the Brooks business goes you are forecasting a nice bump up in the June quarter and I'm assuming September quarter would be up as well. How much of the increase is that you expect over the next couple of quarters that are driven by memory versus the foundry logic space? And then also as another vein how much do you expect the Chinese wins in this business to contribute to revenue in calendar 2018 or however you’d like to characterize it?

We don't have that specificity of the breakout right now. But the foundry business is beginning to increase. So you see some from that but we -- and we always continue to forecast that the number of these cleaners going into memory fabs will be significantly less that go into a high end foundry. But we don't have that specificity to give you yet, but we are pleased by the breadth and the number of different customer applications we have besides just Tire 1 foundry.

And just perhaps an idea of when you might see more Chinese revenue or any sort of guess as to when you start to see significant revenue from that geographic region?

So, we'll see some revenue beginning in Q4 period of our fiscal Q4, but I don't know what to tell you about, when it will be appreciable because again we'll have orders as other equipment companies have orders for populating those fabs.

Thank you very much.

Thanks, Dave.

Thanks, Dave.

There are no future questions at this time.

Okay, Scott. I think we can wrap up. And I'll just extend my thanks to all the analysts and investors that have listened in with us. And we look forward to talking to you again this time next quarter. And thank you very much.