Azenta, Inc. (AZTA) Q2 2019 Earnings Report, Transcript and Summary

Greetings, and welcome to the Brooks Automation Q2 2019 Financial Results Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we'll conduct a question-and-answer session. [Operator Instructions] This conference is being recorded, Monday, April 29, 2019. And now I'd like to turn over to Mark Namaroff, Director of Investor Relations. Please go ahead.

Thank you, Scott, and good afternoon to everyone on the line today. We would like to welcome you to our second quarter earnings conference call for Brooks for fiscal 2019, ended March 31. Our earnings press release was issued after the close of the market today and is available on our Investor Relations website located at www.brooks.com, as are the supplementary PowerPoint slides that will be used during the prepared remarks today. I would like to remind everybody 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 and 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 those forward-looking statements presented today. We may refer to a number of non-GAAP financial measures, which are used in addition to, and in conjunction with, results presented in accordance with GAAP. We believe the non-GAAP measures provide an additional way of viewing aspects of our operations and performance, but when considered with 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 President and Chief Executive Officer, Steve Schwartz; and Executive Vice President and Chief Financial Officer, Lindon Robertson. We will open the call with remarks from Steve on the business environment and the highlights of the quarter. And Lindon will provide a more detailed outlook into our second quarter financial results and provide a summary of our financial outlook for the fiscal third quarter ending June 30. We will then take your questions at the end of those comments. Before turning the call over to Steve, I would like to remind everyone that in our first quarter, we've moved Semiconductor Cryogenics business into discontinued operations for reporting purposes. The pending sale was announced on August 27, 2018 and continues to await approvals by government agencies. We expect that the sale will close during our third fiscal quarter. All reporting, commentary, and guidance in this quarter focuses on continuing operations. With that, I'd like to turn the call over to our CEO, Steve Schwartz.

Thank you, Mark, and good afternoon everyone. I'm pleased to report on results that demonstrate the significant transformation we've achieved toward our goal of being in two high growth profitable businesses. Revenue for the quarter was $198 million, up 11% sequentially and 26% year-over-year with strong Life Sciences growth from both sample management and GENEWIZ, an equally impressive another growth quarter for semiconductor which is still resisting the downdraft in the semi equipment market. I'll give some detail as to what was behind our performance and why those factors are important to our go-forward plans. But before, I'll comment on the individual segments. Let me remind you about our approach to serve these two markets. On the semiconductor side, we leverage our automation expertise to enable our customers to economically produce 7-nanometer and 5-nanometer technology devices that will be key to the rollout of 5G and fuel the further explosion of the data economy. Our automation solutions that enable wafer handling operation under extreme temperature, pressure and contamination conditions are unique in the industry and are key to our strong market leading positions. In Life Sciences, we leverage our automation and cryogenic expertise to provide solutions to a problem that was triggered when the Human Genome was sequenced in the early 2000. Over the past two decades, bio-sample collections have grown from thousands of samples to millions and now we're in a world where hundreds of millions of samples are collected every year, and the volume is still expanding. The value of these samples depends upon precise handling, storage and traceability, issues that are compounded by the size of the collection and the temperature sensitivity of the samples under management. We've had much early success in building cold chain sample management solutions for customers who increasingly rely on this capability for their success. And with the recent addition of GENEWIZ for gene sequencing and synthesis, we have the opportunity to add even more value to these samples. We are flushed with opportunity and with the skills and resources to capitalize on our positions in both markets. We believe our strategy will drive significant shareholder returns as we grow revenue and profit. Now to the results from the quarter. On our Q1 results earnings call, we described for you four objectives for 2019 that are key to our continued transformation of the company and the next step in our expansion. Growth in our semiconductor business at least 5% faster than the semi equipment market growth rate, successful integration of GENEWIZ and achievements of 20% revenue growth with a corresponding improvement in profitability, returned the Life Sciences' sample management business back to high-teens percentage growth and sustainably improved gross margins to above 40% and completing the sale of the cryogenic vacuum business to Atlas Copco. I'll describe our quarterly results in terms of the progress we've made against each of these important goals. Number one, we've positioned our product offerings to enable us to outgrow the semiconductor equipment market by 5% and we believe we are delivering on this objective. With wafer fab equipment spending is expected to be down 10% to 15% this year, we are demonstrating growth. At $113 million in Q2 semiconductor revenue, we were essentially flat with Q1 and up 4% compared with the March quarter one year ago. We also currently forecasted for the full 2019 year, we expect growth even in this down market. I'll give some explanation about what's driving this performance while the semiconductor equipment space is contracting. Our position in the semiconductor capital equipment market is squarely at the center of the major technology inflections that will drive semiconductor leading-edge technology for years to come. New complex device structures with sub 7-nanometer designs will require new chemistries to deposit and remove new materials and ever more process steps. The vast majority of these additional processes are performed under vacuum conditions each requiring contaminant free vacuum automation that can work in harsh chemical and temperature environments. At each new device generation, a larger percentage of process equipment will be vacuum tools, fueling continued outsized growth in our market opportunity. And it's exactly in the center of this contaminant-free automation space that we've dedicated ourselves for the last 30 plus years and it's exactly around these solutions where we have a commanding lead on competitors and our closest bonds with our customers. Among these growth markets, we include vacuum automation, robots and fully integrated systems as well as contamination control products, which are essential in the management of chemical contamination, a normal byproduct of the chip manufacturing processes. And although the industry is in a slow part of an equipment cycle, the demand for cutting-edge technology is still healthy. As we've said in the past, revenue from our vacuum robots business where we sell primarily to Tier 1 OEMs is exhibiting the same trends as observed by the overall semiconductor capital equipment industry. And it's also the only portion of our semiconductor business that's down appreciably. In the second quarter, we had another decrease in our vacuum robot revenue consistent with Tier 1 OEM system shipments and exacerbated by some remaining inventory burn off. That said, revenue from our high value automated systems was up slightly, both year-over-year and sequentially quarter-to-quarter supported by Tier 2 OEM activity, thus, tempering the reduction in overall vacuum automation revenue. We had strong growth in the quarter from contamination control solution. We're leveraging our contamination control expertise in this new and exciting space to deliver solutions, not only for wafer carriers, but also in the radical handling space where protection and management is an equally critical challenge. This is an opportunity that will only grow with each device generation. And we see another new market driver that will come with the adoption of EUV Lithography. We entered this space at an opportune time and we have established ourselves as the clear market leader in a rapidly expanding space. Our CCS carrier cleaner products delivered $24 million of revenue, up 53% year-over-year and our radical storage products contributed an additional $6 million. We are particularly pleased with the way our CCS business continue to expand broadly beyond Tier 1 foundries into mainstream memory, logic, second tier foundries, and now even to discrete device makers and silicon wafer manufacturers. We're in the very early stages of this opportunity, which we expect to continue growing with each reduction in design line with for technologies below 28-nanometer, and for this reason, we believe this segment will remain a key growth driver for the business. And we had a very strong quarter from products serving the advanced packaging market. Revenue from the sub segment was just short of $17 million, a record quarter for us in the space and up more than 40% from Q2 one year ago. We continue to see this is as a secular growth trend that's more and more ICs are assembled with complex substrate handling requirements. Our design activity is at full speed as we're working with customers in every region. Overall, our semi business is positioned to grow across a wide range of leading-edge applications, mainstream technologies and customers. We feel confident in our ability to outgrow semi not only this year, but because of the need for our technology solutions in high growth sub segments for years to come as well. Now onto our second objective. GENEWIZ continues its trajectory to deliver 20% organic growth with associated increase in profitability. In Q2, our first full quarter GENEWIZ delivered $33 million in revenue. The growth is driven by the GENEWIZ value propositions to deliver high quality, sequencing surfaces with exceptionally fast turnaround time. Each of the three major sections of the GENEWIZ business, Sanger, NGS, and synthesis grew in the quarter. We delivered double-digit growth in Sanger sequencing, which is truly exceptional for a business in a mature technology market that's growing somewhere in the low single digits range. But continued technology innovations from our scientific team allows us to dramatically reduce turnaround cycle time for researchers as much as 50% turnaround time reduction for some requests thereby allowing us to capture market share at a very high rate. In the US and Europe alone, we notched another 75 new Sanger customers and most of the gains came from customers located in and around the largest biotech centers in the US, predominantly Cambridge and San Francisco. In next generation sequencing, we saw continued strong growth, driven by demand from the US and Europe. In the December quarter, we launched CLIA/CAP clinical services capability and we received our first orders in the March quarter. We're building our pipeline for Q3 in what will be another high potential growth factor. The GENEWIZ and sample management teams are collaborating on the clinical solution as we have several large clinical sample collection customers to whom we can offer a valuable analytical capability. Overall, in GENEWIZ, we captured 170 new customers adding to the more than 4,000 customers already served. We remain very enthusiastic about this business. Our outlook for the June quarter is for sustained growth as we continue to invest in facilities and equipment and hire and train personnel to meet the strong demand for analytical services that our customers are sending our way. Our third major objective, getting the sample management portion of our Life Sciences business back to high-teens growth and gross margins above 40% has been one of the strong focus for a few quarters and we're making good progress. We know that with global sample growth rates of approximately 10% per year, a high-teens percentage growth is an aggressive target, but with our technologies and solutions we believe that we have to capture more and new share from the sample management opportunity. And against this self-imposed challenge, we believe we're once again in the driver seat. In the second quarter, we delivered organic growth in sample management of 11% with revenue growing sequentially by 5% to $53 million. When we factor in that automation - automated stores business was down 8%, this is an even more meaningful outcome. And looking forward to Q3, I'm pleased to report that samples have begun to arrive from a large study that utilizes both storage and laboratory services. This is one of the projects that we had expected a few quarters ago, but it's just now under way. And just one more data point lending supports our accelerated growth commitments for this year. And finally we're intense upon completing the sale of the semi cryo vacuum business to Atlas Copco. Updates here within [ph] transaction is still being reviewed by the US government, but we remain confident that the review will be completed and the transaction will close during our June quarter. As we wait, we remain closely engaged with Atlas Copco and we have exceptional alignment to what we both anticipate will be a smooth and seamless hand off when we receive approval. So at the halfway mark in fiscal 2019, all initiatives are on track, none without challenges but all with focus and energy and much confidence from us and our management team, that we'll achieve these objectives and further the successful achievement will accelerate us into the next stage of our transformation. Before I turn to our outlook, I want to take a moment to put our current position to perspective. Eight years ago, essentially all of our revenue came from the semiconductor industry. The majority of sales were to OEMs and only a small fraction of our revenue came from IC makers who paid us to repair and refurbish our products which they had purchased from OEM. There was no advanced packaging, no contamination control, food cleaning or radical stocking business and we had no Life Sciences business. Over the years, we've made a number of acquisitions to help us to enter into these new market segments. We doubled down on each of those acquisitions with additional investment. We supplemented them with our core technical capabilities and know-how and we adapted our go-to-market approach to capture growth at extraordinary rate. In the quarter just ended, our first with a full quarter of GENEWIZ revenue, these new fast growing sectors, with the source of two-thirds of our total revenue more than $130 million of our almost $200 million in revenue. Moreover, in Q2, 43% of our revenue came from Life Sciences and we forecast that this percentage will be even higher in Q3. I believe it's fair to say that we've transformed the company and that this step in our transition is complete and that we now have two strong capable growth businesses, built on technology, leadership position. We are now ready for our next stage as we conclude the sale of the Cryo business, reset our balance sheet, reaccelerate our growth and market expansion initiatives and simultaneously drive the next level of profitability from two businesses that have scale. With so much opportunity in front of us, it's our plan to continue this aggressive path for growth and customer capture. To conclude my comments, I'd like to give some remarks about our outlook for the June quarter. In semiconductor, we currently forecast revenue approximately flat with the past two quarters. The makeup however is for flat to slight uptick in vacuum robots as we see a bottom from Tier 1 OEMs and healthy but flattish CCS revenue. We're also getting some early indications for improvements in fabs spending later in the calendar year, which could provide some uplift to both the OEM and fab business. In Life Sciences, the 20% [ph] growth path for GENEWIZ implies an additional couple of million dollars of revenue and we expect a similar increase from sample management. This scenario ought to yield revenue of over $200 million in the June quarter and more growth in the September quarter. That said, the delay in our sample management traction coupled with the semiconductor environment that's down more than we had anticipated at the start of the year makes fiscal 2019 year revenue of $800 million likely target, rather than the $828 million we'd forecasted as we entered the year. But even at $800 million, we will see growth from both semiconductor and Life Sciences businesses. As we reported today, we are cognizant that we're talking to you about a very different Brooks, compared to the Company we were even one year ago. And we look forward to the September Analyst and Investor Day when we plan to renew our model and give you more color about our go-forward Company. With that, I'll now turn the call over to Lindon, who will give you additional color on the quarter.

Thank you, Steve. Please refer now to the PowerPoint slides available on the Brooks' website under our Investor Relations tab. I draw your attention to Slide 3. Steve has shared significant color with you regarding the recent changes, the innovation behind our offerings, the customer expansion and the growth momentum. We have moved the business to have 80% of our revenue portfolio in high growth areas. With 4% growth, our semi business is a stand out in the market, showing the growth even in downward cycle and even with our strength, Life Sciences has moved up to the 43% of our revenue this quarter. This segment grew 76% fueled by the GENEWIZ acquisition and 11% organic growth in sample management. Momentum is with us and our customers are calling on us for more. We see the revenue continuing to ramp in the second half and getting us up to the $800 million for the year as Steve referenced. Let me move onto Slide 4 to review the income statement. Looking at our GAAP earnings, we are reporting $0.05 earnings per share on a total Company basis. As a reminder, we're reporting the semiconductor cryogenics business in discontinued operations as we await the closure of the sale. On the continuing operations, we had a loss of $0.04 per diluted share, which is $0.13 below the prior quarter. As you can see, the operating margin improved significantly and the negative impact for the quarter are all below the operating income line, and are broken out. $8 million of interest expense is associated with a full quarter's impact of the debt utilized to fund the GENEWIZ acquisition which was about $3 million increase sequentially. We expect this to come down in our plans to reduce debt. This impact was approximately $0.03 per share in the quarter. Also in this quarter, we had a $9 million non-cash charge for early extinguishment of debt. This was driven by the need to syndicate the debt due to the extended timeline of the semiconductor cryogenic sale. This impact was approximately $0.10. In total, there is approximately $12 million of incremental cost in this quarter, which will not be with us after the planned reduction of debt is behind us. Let's shift focus to the non-GAAP results on the right side to get a clear view of our performance during the quarter. Non-GAAP gross margins improved 160 basis points year-over-year to 42% driven by improvement in both segments. On a sequential basis, we see 60 basis points improvement comparing to the first quarter which was driven entirely by Life Sciences. This included 60 basis points improvement in sample management gross margins and the favorable mix impact from GENEWIZ. We will give more color on this as we go to the segment performance. Operating expense growth was driven primarily by the addition of the GENEWIZ structure. Non-GAAP operating margins reached 12%, expanding 60 basis points year-over-year and 90 basis points sequentially. Below operating income, you again see the $8 million of interest expense associated with a full quarter's impact of the increased debt which drove that $3 million increase sequentially. In total, non-GAAP earnings per share from continuing operations was $0.17. In summary, the operating income line shows the profitable growth of the business and when we eliminate a significant portion of the debt, the leverage we see on the outline will drop to the EPS line. Let's turn to the semiconductor business on Slide 5. As a reminder, we present these results on a continuing operations basis. Revenue was essentially flat this quarter at $113 million, compared to our first fiscal quarter. However, flat in the current downward environment reflects significant momentum fueled by the design wins we have shared with you in the past. And on a year-over-year basis growth of 4% again is a standout in the challenging semi market environment. This quarter we saw another step of declining component robots consistent with the trends reported by the top-tier OEMs. Offsetting this, we saw growth in our systems business and in contamination control solution. The systems business was up 6% compared to the first quarter and 8% year-over-year. The drivers here include the advanced packaging applications and the fab expansion in China. As Steve highlighted, it was a record quarter for the Contamination Control Solutions with 7% sequential revenue growth, 89% year-over-year. Excluding the radical stockers business, the four [ph] cleaner products were up 53% year-over-year. We're pleased with where contamination control continues take us. We've received first orders from two major memory fabs as they adopt radical stockers to enhance their advanced lithography processes. Gross margins were stable sequentially down by just 20 basis points mainly driven by changes in product and customer mix. This is more than 90 basis points above one year ago, continuing to reflect the transformative value of increasing our exposure to the Tier 2 OEMs and the fab end users. This growth and margin expansion combined with expense controls resulted in an operating income increase of 18% year-over-year and operating margin improvement of 200 basis points year-over-year. As Steve highlighted, looking into the third quarter, we're expecting overall semi revenue to be approximately flat. Looking a little further, we see promising signs of expansion in the fourth quarter supported with growth in each area of robot systems and contamination control. Moving on to Slide 6, let's review Life Sciences. Revenue for Life Sciences in Q2 was $86 million, up 76% year-over-year and representing 43% of our total revenue for the quarter. On an organic basis, Life Sciences grew 11% year-over-year. These results include $33 million in contribution from GENEWIZ, which was acquired in the middle of our first quarter on November 15. Accordingly, the revenue increased a little more than double the prior quarter for GENEWIZ adding $17 million compared to the contributions in the first quarter. GENEWIZ saw a growth traction in each area including Sanger Sequencing, the Next Generation Sequencing and Gene Synthesis. And as Steve also pointed out, there are many positive signs for continued growth. The addition of the 170 new customers highlights the market momentum the team has carried. The first clinical NGS orders highlight the application opportunities. We have reinforced this with additional investment for expansion including additional equipment and resources. Organic growth in our sample management business returned to double digits this quarter, growing at 11%. Growth was solid among BioStorage services, infrastructure services and the consumables and instrument. We saw growth in new adoption of the consumables and instruments across multiple end markets in North America as well as in China. Overall sample management carried double-digit growth despite a still sluggish systems business, which was 8% lower this quarter than a year earlier. We believe this overall growth continues to strengthen as we move toward the end of the year. Store systems business will return to growth as we are confident to convert a rich opportunity pipeline into new bookings for stores. We also expect BioStorage services to pickup in volume in Q3 as contracts for studies is driving opportunities in storage, kidding and lab services. Life Sciences' gross margins were 42.6%, up 270 basis points from Q2 a year ago and 170 basis points compared to the first quarter. GENEWIZ came in at 49% gross margins, helping to mix margins upward and sample management made progress with 60 basis points improvement above the first quarter. The operating expense line for Life Sciences absorbed a full quarter of expense of GENEWIZ and additional investments to support their growth expansion. In total, the segment operating profit was $5 million or 5.9% of revenue in Q2 '19. This is 2 points of operating margin expansion compared to the prior quarter and to last year's second quarter. Each of the operating units, sample management and GENEWIZ provided approximately the same operating margin in the quarter. This reflects 5 points of operating margin expansion in sample management and the GENEWIZ margin reflects a full quarter of results, along with additional investments. Looking to Q3, we expect Life Sciences' revenue to provide $90 million to $94 million in revenue, continued improvement in gross margins that enables another step of operating margin dimension. The organic growth, which is driven entirely by the sample management business should be in the 11% to 15% range this coming quarter. Let's move on to the balance sheet on Slide 7. Net working capital remained consistent with the last quarter at $194 million with accounts receivable and inventory stable. Other drivers included a decrease of $7 million in other current assets, while payables and liabilities were reduced by $10 million. We finished the quarter with $140 million of cash, marketable securities and also with a net debt of $403 million. As a reminder, we secured that incremental $350 million term loan to finance the acquisition of GENEWIZ during the first fiscal quarter. We expect to receive approximately $540 million in cash proceeds net of taxes upon the closing of the sale of the Semiconductor Cryogenics business. And we intend to apply those proceeds to reduce the debt by approximately $350 million. Slide 8, reports on our cash flow. In the second quarter of 2019, we produced $16 million of operating cash. This was up from $6 million in the first quarter. CapEx was $6 million, consistent with last quarter and resulting in free cash flow of $10 million. We paid out $7 million in dividends to shareholders in the quarter and finished the quarter with $140 million of cash and marketable securities on the balance sheet. Let's turn on to Slide 9 and look at the guidance for our third fiscal quarter of 2019. We expect overall revenue to be in the range of $200 million to $210 million. This reflects an estimate of semi at $100 million to $116 million approximately flat quarter-to-quarter and Life Sciences to be in the $90 million to $94 million range. Our non-GAAP earnings per share is expected to be in the range of $0.13 to $0.18. At the beginning of my remarks, I highlighted the key takeaways and pointed to the momentum we are seeing in the year. Let me round this out once more. The transformation is in place and the next step the closure of the Semiconductor Cryogenics sale will allow us to reset the balance sheet and re-establish capacity for additional acquisition. The 2019 year has taken shape and customers are being added in each market and the momentum is driving both segments the growth and margin expansion. We foresee the year producing approximately $800 million in revenue and we believe this will bring $0.80 to $0.90 of non-GAAP earnings per share. This shows Life Sciences revenue at about $345 million and semiconductor solutions at about approximately $455 million. With the significant changes in the portfolio and financials and with our reset of the balance sheet that sets us up for another chapter of investment, we are indeed planning an Investor Day on September 17 in New York City. As always, the lines will be opened to join from wherever you are sitting. This concludes our prepared remarks. I'll now turn the call back over to Scott, the operator, to take questions from the lines.

Thank you. [Operator Instructions] We have a question from the line of Craig Ellis with B.Riley, FBR. Please go ahead.

Thanks for the question and congratulations on strong execution in a tough semi CapEx environment. Lindon, Steve, I want to start off just by clarifying operating expenses in the reported quarter, they came in quite a bit lower than had expected by about $5 million. So Lindon, how much of that may have been either a timing issue or just better than expected execution and other factors, if you could break that up for us? Thanks.

I think the operating expense came in to touch lighter on -- in, say the sample management and the semi side. A piece of this, by the way, was also reduction of some variable comp accruals in the quarter on a year-to-date basis. I would emphasize we maintained investments, we maintain investment GENEWIZ for expansion and both semi and sample management operating units also made selective investments probably to tight expense control.

All right, that's helpful. Turning more to forward-looking items. Steve, thanks for the color on the different parts of the business and some of the dynamics there. You're clearly outperforming industry in a number of various on the semi side and especially in vacuum robotics versus our expectation. So can you just talk about what's happening across the opportunity set that you see and what's helping you outperform in such a difficult environment here in the calendar second quarter?

Sure, Craig, thanks. So let me just rehash a little bit. I'll add a little bit more color. So the vacuum robots from the Tier 1 OEMs are down but we see this kind of bottoming out. So we've had three quarters of sequential decrease in the amount, but we think that's bottomed out. We think part of that's inventory and part of it's just volume picking up. So we're - we're encouraged by that. I can't tell you what that looks like for the back half of the calendar year. But, we see it bottoming here for the -- at least for the June quarter and we anticipate that will begin to be up. However, as we've talked in the past, we have vacuum automation that we sell to some Tier 2 equipment makers, who've taken entire vacuum system from us and there the content that we provide, the ASPs are considerably higher, that business continued to be up for us, and we saw particular strength in China. So Chinese OEMs both for semi applications and IC fabs and because of pretty strong market share, they have an advanced packaging, a lot of vacuum automation is going into China. So we're helped by that. And we do believe that that will persist throughout the rest of 2019 because if you think those market positions have been established and they'll continue. On contamination control, we had a big quarter when we add up the carrier for the wafers and for the radical stocking, we're almost $30 million in revenue. And we anticipate something similar in the June quarter. And we attribute that more to the breadth of the customer base now, we're in a period where next quarter we might ship products to 10 different customers. And, Craig, a year or two years ago we were shipping to three or four customers in a quarter so, and the applications are five and six different applications doing, foundry, logic memory, discrete devices and even wafer makers. So we think the breadth is expanding. We need a few more cycles there, not cycles, we need few more quarters there to understand the sustainability, but we are pleased with how that's expanding. And the wild card for us although it seems to be pretty steady it's a little bit tougher for us to predict the advanced packaging business, but to-date that's been a steady grower for us and have a record $17 million quarter feels particularly good. So we believe it will sustain. We're not ready to call it an upturn here, but we think the business that's come to us over the past quarters will sustain and we are encouraged though that perhaps there'll be some incremental high-end Tier 1 foundry spending that comes our way, kind of toward the end of calendar '19 or early 2020.

That's helpful. Thanks, Steve. And can I follow up with just further clarification on the point you made on advanced packaging. So one of the larger IDMs globally announced a product strategy that included chiplets is part of its product road map and really a reliance on more packaging technologies to bring together true bleeding edge elements of a system with trailing edge to best optimize its manufacturability and its capabilities. If that were to become more prevalent across IDMs and fabless companies, what would that mean for the advanced packaging business in Brooks?

Yes, Craig, I think we feel confident about our ability to capture. We feel confident about our market share opportunities and handling almost any kind of capability, we think will be good for us. But I think -- I got to say, I think we need to find out a little bit more about what drives some of these specific opportunities. But I could be a little more informed as I respond to that one. But we're -- again, we're confident in share, we are confident in position. I won't say that we have the best handle on specific manufacturing sites going in right now.

Okay. Lastly for me. You expressed confidence in closing the cryogenic steel, which is encouraging, but can you just help us with some color on the factors that are giving the company confidence that will close here in the June quarter. And then as we look beyond that close, any thoughts on what we would expect, either with respect to operating expense or some of the other line items that might be able to be further optimize once that business does close?

Yes, Craig, I wish we could give some more color. It's -- the process is confidential, but I can tell you that there's been a lot of good cooperation and we're going to wait now. We're in a waiting mode and again, both parties are fully engaged in when we were confident about our ability to move forward, but it's all we could say at this time.

And, Craig, I'll comment on the balance of your question. We still have our teams fully engaged to support the entire business and as well the transition of the sale. So you're -- the implication of your question is exactly right. Once the sale is completed, then we really look at that structure and we're already in mode of doing some of that and making plans and having a framework for leaning out the business. And at the same time, as I highlighted just a moment ago, making the right investments to support the growth of the business. So you're going to see more commentary and color on this later in the year as the deal closes, but until that happens, we probably should -- describing too much about that. Thank you.

Got it. Thanks, guys.

Thanks, Craig.

[Operator Instructions] And we have a question from Patrick Ho with Stifel. Please go ahead.

Thank you very much and congrats on a nice quarter. Steve, maybe first off, in terms of the semiconductor business, you talked a little bit about second tier foundries and some of the opportunity there. I understand how leading edge will continue to be a driver for most of your semi business. But can you give a little color in terms of the trailing edge and some of the opportunities there, because that segment seems to be holding up its spending from a CapEx perspective across the board and there's emerging opportunities for some of the equipment vendors as well. So if you could give a little color on that first.

Sure, Patrick. I think, first of all the things that Tier 1 foundries discovered about the benefits of contamination controls apply exactly to anybody going below 28-nanometer. And I'm not sure how to comment on specifically what they're putting through the foundry, but in general we see something that looks like a replication of what we've seen in Tier 1 foundry. So we're encouraged by that and as I mentioned, the breadths of the opportunity brought by the Tier 2 foundry is helping to add and broaden the customer base for us in the contamination control area.

Great. And maybe as my follow-up on the Life Sciences side, you got a good strong quarter coming out of the bat with GENEWIZ and you mentioned the number of customers. What I'm getting I guess on a quantitative basis, but maybe more qualitative, are you seeing any leverage yet between the existing customer bases on your sample management side of things? Or a lot of these customer wins with GENEWIZ, I guess are with customers that they had been dealing with when they were an independent company, have you seen any of the leverage yet?

Patrick, we haven't seen leverage yet but it's between the sample management team and the GENEWIZ teams, they are developing strategies, exchanging leads, and I think there's a lot of energy behind it. So we are confident that we will begin to close opportunities here. And maybe even as early as this current Q3 but the teams are really active and very enthusiastic about the opportunities. And as I mentioned in my remarks, specifically around some of the clinical capabilities that GENEWIZ just launched and that Duffy [ph] and his team has been working on now for sometime, we think those might be some of the earliest opportunities for us. So we're encouraged by it. We'll be sure to report back when we start to get something meaningful. But we do want to be able to explain to everybody on the call what fraction looks like between those two ends, and we're really positive that -- as the teams are positive that there are opportunities here for revenue synergies, and we're looking forward to delivering some before year end.

Great. And maybe my final question, for either you Steve or Lindon. In terms of the progress you've made on the Life Sciences' margin side, part of it is obviously due to GENEWIZ being a contributor, a higher gross margins. But what can you I guess specifically say on the sample management side, that's helped improve the overall Life Sciences' margin profile over the last few quarters and I guess your expectations is that it continues to improve as we go forward.

Yes, Patrick, it's a good question, and let me add some color on that. So as we've described in the past, we've had lagging margins on the store systems side and pretty good stability on the balance of the portfolio particularly driven by BioStorage services and sample management. So when you look at that in total, we continue to -- I think I'd say rest of group advisors on the store systems and we anticipate more progress on that going forward. So the 60 basis points improvement we had actually was driven as much by other areas. So in this next quarter, we anticipate to see step up in the gross margin and it will be primarily driven by the store systems improvement, that's our expectation. And you combine that with what I think off of this quarter, we'll look at something pretty stable on the GENEWIZ business as we've described before will be in the range of 47% to 51% this quarter ended up about 49%. So I think we're in the right range. I think you'll see a healthy gross margin profile next quarter, again driven on the improvement of sample management.

Great. Thank you very much.

Thanks, Patrick.

Thanks, Patrick.

There are no further questions. And I'll turn it back to Lindon Robertson for closing remarks.

Great. Thank you, Scott, and thank you everybody for joining. As we reflect on the quarter, it really indeed was a milestone quarter for us in the path for transformation. We saw the shift going above 40% on Life Sciences and meanwhile, we are outperforming the market on semiconductor. This is exactly the design of the portfolio changes we've been striving to make. We're excited about where we are. We look forward to the closure of the sale on the Semiconductor Cryogenics business, which gives us an opportunity to reset the balance sheet, make aggressive and ambitious plans. Going forward, and we look forward to the opportunities we mentioned to share more about that in our Investor Day in September. Meanwhile, we'll look forward to seeing you next quarter on this earnings call. So thank you very much for being with us.

That does conclude the call for today. We thank you for your participation, and ask that you please disconnect your line.