Azenta, Inc. (AZTA) Q4 2020 Earnings Report, Transcript and Summary

Greetings and welcome to the Brooks Automation Q4 2020 Financial Results. [Operator Instructions] As a reminder, this conference is being recorded, Tuesday, November 10, 2020. I would now like to turn the conference over to Mark Namaroff, Director of Investor Relations. Please go ahead.

Thank you and good afternoon everyone on the line today. We’d like to welcome you to our earnings conference call for the fourth quarter and year ending of fiscal 2020. Our fourth quarter earnings press release was issued after the close of the market today, and is available on our Investor Relations website located at brooks.investorroom.com, in addition to the supplementary PowerPoint slides that will be used during the prepared remarks today. Before we start, I would just 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 Litigations and Securities Act of 1995. There are many factors that may cause actual financial results and 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 our 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 results or events occur that differ from our forward-looking statements presented today. We also 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 that non-GAAP measures provide an additional way to view 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 President and Chief Executive Officer, Steve Schwartz; and Executive Vice President and Chief Financial Officer, Lindon Robertson. We will like to open up the call with remarks from Steve on the highlights of the fourth quarter and the full-year. And then Lindon will provide a more detailed look into our financial results and our outlook for the first fiscal quarter of 2021. We will then have time to take your questions after the prepared remarks. And with that, I like to turn the call over to our CEO, Steve Schwartz.

Thank you, Mark and good afternoon everyone. It's a pleasure to be able to report to you today on results from another record quarter and a record year for Brooks. In what remains an uncertain global economic environment, we continue to capitalize on the sustained and accelerating demand for our capabilities. We're a key contributor to what's powering the Life Sciences discovery market, as well as a critical provider of technologies for the Semiconductor industry that keep businesses and institutions functioning in this remote and interconnected work environment. Our unique positions in these important technology markets is what keeps customers at our doorstep. We're proud of our essential contributions and humbled by the requests made of us by some of the world's most necessary companies. And it's what keeps all of us energized as we look to the days ahead. Q4 was an outstanding quarter for the company. Semiconductor with the third consecutive record quarter continued on its torrid expansion path, the result of years of R&D investment that's led us to design wins and share gains to satisfy the demands of a market that's been propelled by insatiable data rich applications. The Life Sciences market, which is also providing rapid expansion opportunities, has reaccelerated after pandemic-related perturbations that dramatically slowed demand from academic and research laboratories. And at present, we're right back on the trajectory we were aiming toward prior to the pandemic. All-in, we're exercising our business model and capitalizing on our two businesses, which are leaders in their respective markets. We're investing in new technologies and adding capacity not only to win, but to sustain share gains to ensure that we meet the demands of our robust market. We believe demand for our leading technologies and high quality offerings will remain strong for many years to come. I'm eager to give you some color into the business and Lindon will punctuate our results with specifics of our exceptional financial performance, but before I continue I'd like to make a brief comment about the impact and implications of the COVID-19 pandemic on our business. Since the end of the June quarter, our supply base has been stable and dependable, and as long as Asia is not a hotspot and North American companies can continue to operate, we’ll remain at low risk to any interruption in our ability to deliver. That said, we're also closely monitoring the lockdown in Europe because of the potential it could have to impact our customers’ ability to order and accept products and services from us. Our forecasts reflect the current COVID situation, but we'll remain vigilant and our decisions will be guided first by human safety, while we comply with all regulations and continue to follow recommended guidelines. In any case, we continue to exercise best known COVID-19 work practices and take extra care to ensure that our employees are safe and informed. We believe that our processes are working, and we're grateful to our employees for how they have met the challenges and responsibilities of our essential work. Now back to results. Revenue for the quarter was $246 million, up 24% year-over-year. For the full fiscal year, revenue of $897 million was an increase of 15% over 2019 with almost equal contributions from Semiconductor and Life Sciences, and I'll give you some key highlights from each business beginning with Life Sciences. In Q4, we achieved a major milestone in our Life Sciences business. For the first time, revenue crossed $100 million threshold, jumping to $108 million and back on the trajectory consistent with recent historical performance. We set new records in both services and products, and we're beginning to see the green shoots from synergies that will become increasingly more meaningful additions to revenue. In the Services segment, revenue at $70 million was up 12% year-over-year with GENEWIZ contributing a new record of $48 million, up 21% from Q4 of 2019. Specifically, in the GENEWIZ business, next generation sequencing delivered another record quarter just shy of $18 million, which was up 34% sequentially and 21% year-over-year as customers come to us for our specialized library preparation and bioinformatics solution coupled with our fast turnaround time. During the quarter, we had a healthy slug [ph] of revenue from one tranche of work from a multi-year, multi-million-dollar project that we won earlier this year. Additionally, orders grew steadily through the quarter and we remain quite busy in our NGS Laboratories across the world. Synthesis sustained its robust growth and delivered another record quarter at $13 million, up 5% sequentially and 34% year-over-year. Our ability to deliver high quality constructs in a timely fashion has attracted opportunities from larger customers who are gaining confidence in our scale and capabilities. We're making investments to increase capacity and expand our geographic footprint to be able to get in front of what we see as a long and strong demand profile. Finally, we report that our Sanger Sequencing business has largely recovered to pre-COVID demand levels. In our last call, we noted that as we exited the June quarter, our Sanger business had recovered to approximately 90% of pre-COVID daily volumes, and although not all of our academic and industrial labs are completely back to full speed, our Sanger business increased 50% quarter-to-quarter and delivered $13 million of revenue, which was also a record quarter, up 4% year-over-year. This record revenue even without full customer demand is consistent with our continued share gains and the persistent trend toward outsourcing more of this science to GENEWIZ. In the sample and repository solutions portion of the services business, we're redefining the value of world-class sample and repository services. Over the past six months, we've affected to significant changes to the SRS business, which impact our path forward, both for the better. Specifically, at a time when some of our clinical trial sample traffic has slowed, we've been engaged to help manage many COVID-19 related critical projects in support of their next breakthroughs in treatments. We're active partners in the management of the entire discovery and treatment cycle. As an example, and one that we're particularly proud of, our sample repository solutions team has been selected by Catalent Biologics as a trusted partner for the storage and transport of one of their significant COVID-19 vaccine programs. Catalent is an industry leader in developing and manufacturing solutions for the delivery of drugs, biologics, cell and gene therapies, and consumer health products. Their state of the art manufacturing facilities are producing high volumes of vaccines that require precise cold chain management, including temperatures ranging from minus 20 to minus 80 degrees Celsius. We are providing Catalent with a custom hybrid storage solution that manages the cold chain care of vials containing doses at their production facilities, transportation for the finished vaccine vials to our secure storage locations, and ultimately delivered them to the customer specific destination. The work we've done in our hub strategies for the world's largest pharmaceutical companies provided a proven solution that is tried and tested. We're quite proud to be a partner to Catalent in the fight against COVID-19. In addition to our work with Catalent, we're contractually engaged with several companies in the U.S. and Europe who are working on the vaccine end of the COVID-19 cheer pipeline. Revenue to date from these vaccine initiatives is modest, but thus far we've secured agreements that we believe will generate more than $10 million of incremental revenue for SRS in fiscal 2021. This vaccine-related opportunity is important, and we believe it will remain a valuable offering even beyond the current rush of COVID-19. Our opportunity space is literally end-to-end support from research to cure, and though it's taken COVID-19 to accelerate this opportunity for our business, it is durable and something that we believe will be an integral part of our value offering to the industry going forward. The second significant pivot in the SRS business relates to us concluding our BioStorage Alliance agreement with RUCDR at Rutgers University. This was the result of their change in business direction and our addition of GENEWIZ. This change leaves us free to expand our position in services that were previously performed by RUCDR, and it clears the path for higher growth and better profitability in our services business. Lindon will give more information as to the financial implications of this change, but suffice it to say that if we exclude Alliance revenue from our numbers, our sample and repository services business was up 9% sequentially, and up 18% year-over-year. Across the services business, this new structure leaves us extremely positive about our forward momentum, and we start 2021 with new opportunities in hand that promise another strong growth year. Across the services arena, we're particularly encouraged by the several new synergy opportunities that combine the offerings of SRS and GENEWIZ into high value solutions. We’re already benefiting from the strength of our account team as two major pharmaceutical companies who have been large bio storage customers, each tripled their business levels with GENEWIZ during the second half of 2020. Similarly, we recently won two multi-million dollar sample management contracts that have included our Limfinity Informatics limbs offering as a large part of the value proposition for the secure management of millions of critical samples. We believe that these samples are representative of the kinds of opportunities we can capture, and we anticipate using these successes as a model for how we can target and win incremental business in the coming year. The lines between discrete elements of our value proposition are quickly combining into a very unique value proposition and the realignment of our services business unit is proving to be an exceptional vehicle to communicate and sell value to customers. Finally, I want to emphasize the continued customer capture momentum that we've enjoyed over the past years. We're cracking the code on how to continue to win new accounts in this distanced COVID environment. In Q4, we added 245 new customers across the services business. Our reputation for reliable, high quality offerings and the fact that we've been able to deliver for customers throughout the pandemic is a big contributor to both our business and to our standing as a high capable service provider. Our outlook for services in Q1 is for another strong quarter with year-over-year growth, even if we might see some softening sequentially. Historically, the December quarter is lighter than the September quarter, due in large parts of the holiday season in the western world, but we nonetheless remain extremely busy at this time and we're confident in the vitality of the markets we serve. In Life Sciences products, we also had an exceptional quarter. Revenue was $39 million, up 27% sequentially, and 20% year-over-year. As we've stated, COVID-19 has had a mixed impact on various sub segments of the products business, but in one meaningful way has accelerated what we believe will be a positive and lasting shift in our opportunity. Specifically, we have a strong demand quarter for our consumables and instruments. Revenue was $24 million, up 37% sequentially, and 67% year-over-year. Demand for PCR plates remained robust, but that was not the source for the sequential growth as we had similar demand in Q3. Rather, we've seen significant demand for our instruments products which are used to format samples in automated workflows. Capping and decapping, sealing and peeling, readers and volume measurements are important elements in any workflow, and automated instruments are critical components of high volume lines. Additionally, when a workflow is automated, the selection of the consumable vial or tube sample container becomes Paramount as the characteristics of the physical dimension, the material it’s made off, and the identification markings are crucial to make sure the workflow is free from the possibility of human error. So, the COVID-19 high volume testing lines, which have been constructed over the past quarter have accelerated not only our instruments business, but also the need for higher quality, higher fidelity consumables which fit into these automated lines. In time, the COVID-19 related business will subside, but we do not envision a day when labs fall back to manual processing, as the benefits to automation have just been given an adrenaline rush, and there's no looking back. In addition to the strong revenue results, C&I bookings were particularly healthy at $40 million, giving us confidence as to some sustained high level of demand in a supply constrained environment. The automated stores business remained healthy, albeit with some continued revenue recognition delays because of limited access to customer sites to complete acceptance testing, nonetheless, we booked five new large store projects during the quarter and we signed off on four projects that had been underway during the pandemic. So, signs are improving. Additionally, we had our second highest quarter for automated cryogenic stores with more than 20 units shipped. We continue to see the vast majority of systems destined for cell and gene applications, and momentum continues to build. Our outlook for the Life Sciences products businesses for sequential growth in the December quarter, with continued strength in the consumable and instruments business, and a more tepid pattern in stores is, we're still feeling the effects of restricted travel, impacting the speed and efficiency with which we can install new tools at customer sites. In any case, we're very positive about our market position across our products portfolio, and encouraged by the 100 new customers we added in the quarter. The products organization continues to make operational progress in terms of the speed with which we can deliver products. We've never been in a stronger position as we are today. And we anticipate good growth and market capture to continue in 2021. Overall, we're very pleased by the outstanding performance of our Life Sciences team as they continue to build momentum and adapt products and service offerings to bring more value to customers. And now to my remarks to the Semiconductor business segment where we continue to deliver outstanding results that remain dependently ahead of the growth in the market. Revenue in the quarter was another record at $138 million, up 9% sequentially and 31% year-over-year. Our key technologies, vacuum automation and contamination control remain as long-term secular growth drivers and we’re a CCS powered growth in the first half of 2020, growth in the second half has come from equipment level automation and a reinvigoration of the advanced packaging sub sector. We're particularly pleased by their performance in each of the areas in which we're focused and I give some color here. As you're all aware, the market for Semiconductor capital equipment is robust and forecasts are for this momentum to continue into 2021. To put some performance numbers to the quarter, our vacuum automation products, including vacuum robots and vacuum subs – and vacuum systems, products that we sell to OEMs was up sequentially 23% and up an impressive 68% year-over-year. We attribute this outsize growth to three compounding factors. The first is persistent secular growth drivers. Each generation of Semiconductor technology requires more process steps that are performed under vacuum conditions, particularly deposition and etch steps, hence a higher percentage of process equipment requires vacuum automation. The second is market share gains. We’re gaining market share by winning more business from OEMs who are replacing their robots with our robots, and we're displacing legacy competitive designs with our more capable products. And finally, there's an additional expanding market for our products. As Asia continues to be the geography where most of the Semiconductor manufacturing occurs, particularly Taiwan, Korea, and China, there are a significant number of Asian equipment makers who are gradually winning more share in their domestic markets. And we have a very high share of vacuum automation with these Asian equipment makers. Taken together, these factors have compounded our growth rate to be significantly above the rate for the Semiconductor equipment market over the past five years. And what drove our 68% year-over-year growth in vacuum automation in Q4. And even though we're currently running at record level for vacuum robots, our forecast is for continued strong growth again in the December quarter. We also have solid quarter for advanced packaging with revenues of $17 million, up 30% sequentially and 68% year-over-year. After a somewhat softer first half of 2020, we've begun to see a pickup in this segment driven primarily by automotive and 5G markets. And I turn now to the contamination control business where we’re clearly at a new threshold. Revenue for the quarter was a very solid $33 million, down approximately $2 million sequentially, but up 4% year-over-year. Moreover, $33 million was the lowest revenue quarter of fiscal 2020, but still higher than any quarter prior to 2020. This illustrates the coming of age of the CCS business. It's expanded beyond Tier 1 foundry into almost all other device application types, including memory, logic and even weight for manufacturing. The need for precise contamination control of airborne molecular contamination now spans all aspects of device manufacturing, and very different from even a few years ago, when only sub 20 nanometer foundry needed CCS products in any volume, we now count approximately 100 different device makers as customers for our products and technologies, and the number of our tools required to yield that each technology node continues to increase. In fiscal 2020, our CCS business delivered $158 million in revenue, up 33% over fiscal 2019. We continue to develop new products and cleaning technologies for future device generations, and we're confident that we have an expanding market opportunity in front of us that will be enhanced by the more stringent requirements for radical management that are brought about by the world of UV technology. All-in we're extremely bullish about our Semiconductor business. The market trends continue to favor our technology. In fiscal 2020, we had a record year for design-in wins at 144, which came from 55 different OEMs and 32 end users. This was up 15% from our record in 2019. This increase is a testament to the value that we bring to customers and the strength of our position in these markets. We currently forecast another strong quarter in December with growth in automation products and a strong, but slightly down quarter in CCS. That said, indications are that we're in for another meaningful growth year in 2021. And we think that we're positioned exactly where we ought to be once again to outgrow the wafer fab equipment market. In both Life Sciences and Semiconductor businesses, we've established clear leadership positions in markets that will provide fuel for many years to come. Ordaining share and putting more space between us and our competition, as we're even closer to customers and out of the front of their critical needs and roadmaps. We're resolving their problems before they become obstacles. We enter 2021 with much the same energy and momentum that we felt at this time in each of the past three years. Our markets are robust, our business model is solid and our employees are energized by and enthusiastic about all the potential that lies in front of us. Our outlook for 2021 is for more strong growth, more share capture, and the continued build up of strong value propositions that are the foundation for exceptionally high growth rates and accelerated profitability. That concludes my formal remarks about the quarter and I’ll now turn the call over to Lindon.

Thanks, Steve. I call your attention over to the slides on our website. And I’ll begin with the summary highlights on Slide 3. Q4 indeed was a strong finish for the year. Revenue grew 24% year-over-year, fueled by the strong performance in Life Sciences up 15% and an acceleration in Semiconductor Solutions to 31% growth year-over-year. As we dig in, you will see that the doubling of our non-GAAP EPS has no unusual anomalies in the prior or current periods as they say we earned it the old fashioned way, just pure operating margin expansion. On a full-year basis, 2020 revenue was 15% higher than 2019 at $897 million, again supported by double-digit growth in both businesses of Semiconductor and Life Sciences. It was comparable between the two businesses with Life Sciences growing 16% and Semiconductor 14%. Despite the turmoil in the environment through the year, the non-GAAP earnings per share for the year landed rather precisely in a range we described a year earlier and $1.26 or an increase of 65% over 2019. As you might expect, with the acceleration of earnings comes cash flow. Operating cash flow of 52 million for the fourth quarter is a record quarter for the company. We ended the year with 306 million of total cash, equivalents, and marketable securities on the balance sheet. We are in a net cash position of $255 million. Those of you that have been with us know we continuously track ourselves to a three-year model, where our most recent model was defined in our September 2019 Investor Day event. I am pleased to confirm that in our estimation, we have achieved the results thus far to put [it solidly] on track for the 2022 target revenue of $1.1 billion to $1.2 billion and non-GAAP earnings per share of $2 to $2.40. Let's now move on to slide four for the details of the fourth quarter. At 24% growth, we had 47 million of revenue year-over-year to arrive at the 246 million in this fourth quarter. On a sequential basis, the revenue growth of 12% added $26 million. Both businesses have significant momentum. Life Sciences added 15 million of that 26 million with sequential growth of 16% and semi added the other 11 million with sequential growth of 9%. Both businesses saw attractive margin expansion at the gross margin and operating margin lines. As is our tradition, let’s observe our GAAP earnings profile first. They carry similar dynamics as highlighted in the summary, gross margin expansion leverage on the operating expense structure, bringing earnings per share for the [quarter to 39], more than double of what we reported in the third fiscal quarter. Now, let's turn your attention over to the non-GAAP results on the right side of the page. Non-GAAP earnings per share for the quarter came in at $0.47 per share or 100% higher than last year, and 48% higher sequentially driven by strong gross margin and operating margin expansion across our businesses. Gross margins came in at 46.6% expanding 490 basis points year-over-year significantly driven by 790 basis points improvement in Life Sciences, but also supported by semi with 260 basis points improvement year-over-year. Perhaps most notable in these dynamics, our Life Science business, which consistently demonstrates the higher growth capabilities earned non-GAAP gross margins in excess of 50% for the quarter. Operating expenses for the quarter increased by 13% as compared with Q4 2019. The SG&A increased year-over-year was driven primarily by compensation expense, most of which was higher variable compensation accruals tied to performance and a smaller element tied to an increase in headcount. Sequentially, the operating expense change was driven by the variable compensation accrual. The aggregate of 490 basis points of year-over-year gross margin expansion combined with the leverage of much faster revenue growth and operating expense results in net operating income growing 112% and the margin structure significantly enhanced at 18.2%, up 760 basis points. Below operating income there was not much change in the other expenses. The non-GAAP tax rate, however, increased year-over-year from 18% to 22%, but still net income is up 104%, and earnings per share doubled to $0.47. As we turn to Page 5, we can see a similar summary for the year. We ended fiscal 2020 with a revenue of 897 million, an increase of 15% from 2019. In the GAAP results, the total pre-tax income increased 66 million half or more precisely 32 million came from improved operating income with improved [operating margin instruction]. The other half came as a result of our 2019 paydown of debt, which drove the significant reduction of interest expense and we had no charges for debt extinguishment in 2020. Looking at the non-GAAP side, you can see that the operating structure has improved substantially, and we do have the impact – we do also have the impact of lower interest expense, all producing a significant increase in the earnings per share. I think there are two key points highlight for you. First, results of the year have significant momentum from the second half, which we expect to continue. Notably the $0.78 we delivered in the second half has been more than all of [2019 EPS]. Second, considered the source of growth behind the revenue and profit. The Semiconductor business up 14% drove 62 million of the revenue growth, while the Life Sciences was up 16% and drove 54 million. Clearly, they have two growth engines at work. And at the operating income line, where we grew 32 million, we had 13 million of that come from the Semiconductor business, and 18 million of that come from the Life Sciences, which saw a material improvement in gross margin along with the growth. We had two very strong profitable growth engines. In total, we delivered $1.26 of earnings per share, up 65% from last year. Now, please turn over to Page 6 for our segment results starting with Life Sciences. Addressing the fourth quarter first, our Life Science business generated revenue of 108 million, an increase of 15% when compared with Q4 2019, and an increase of 16% sequentially. Let me break this down for you. The products business as Steve referenced grew 20% year-over-year, driven by strong demand in consumables and instruments is highly transactional area of the business was already on a nice growth path prior to COVID, but is benefited from additional tail wins as researchers around the globe have found our PCR plates, our broadline of automation capable tubes, and our automation instruments to be of high value to them in the fast pace of today's COVID environment, and the pursuit of testing and vaccine development. The C&I business crossed over for the first time to be more than half of our products revenue for the quarter. Life Science Service business, excluding Alliance revenue grew 20% year-over-year. This business is comprised of GENEWIZ and our sample repository solution service offerings. The GENEWIZ business grew 21% year-over-year, and 29% sequentially, reflecting a healthy rebound in the areas previously held back by COVID. This was primarily in the Sanger based Sequencing services. As Steve described, this recovery occurred through the quarter and fueled the sequential expansion. The year-over-year growth was heavily driven by continued strong next generation sequencing and the synthesis demand – and is still soft though positive Sanger year-to-year comparison. The complement of Life Science Services is our Sample Repository Solutions services. When excluding the Alliance revenue stream, Sample Repository Services is up 18% year-over-year. The Alliance revenue resulted from an arrangement established years ago, as Steve described in the bio storage technologies business. We managed and administered the customer contracts taking on the role of billing and collections, while subcontracting the Alliance partner to provide genomic analysis. Total, it drove about 21 million of revenue in all of 2019, very low gross margin. In light of our comprehensive GENEWIZ genomic service offering, we have mutually agreed with our Alliance partner to dissolve the agreement and have substantially exited the relationship as previously defined. There are two net impacts from unwinding this arrangement inside these fourth quarter results. Revenue growth was dampened. And secondly, average gross margins benefited from our improved mix. So, let me summarize revenue trends succinctly. First, our total of Life Science business in the fourth quarter when excluding the Alliance revenue grew 20% instead of the 15% shown. The Life Science products, as we said, grew 20% as reported, and the Life Science Services business, excluding the Alliance revenue also grew 20%. Within that services business metric, GENEWIZ again grew 21% and the Sample Repository Solutions Service grew 18%. So, when we additionally adjust this overall metric for growth and that being the adjustment for currency, removing the revenue generated from our [row of acquisition], and the impact of this Alliance unwinding in the organic growth of our total Life Science was 17% year-over-year. One more revenue metric for you before we move on to gross margin, and our Life Sciences business, prior to the recent realignment we had in our business, we had shown our total Life Science simply split between GENEWIZ versus sample management. We had described and tracked ourselves to an objective to have sample management growing this year double-digit by the fourth quarter. On the as reported basis for the Alliance revenue included the business grew 11%, but on an organic basis excluding the Alliance revenue stream the rural acquisition in [the currency] grew 14% year-over-year. So, it's a very strong finish, which I believe reflects a very healthy market and excellent execution of the recovery roadmaps, despite a very rocky COVID environment throughout the year. Now, for gross margin in the quarter. At 50.5% for this quarter, we are higher by 790 basis points year-over-year. Excluding the low margin Alliance revenue streams from both periods, we would show 650 basis points of improvement year-over-year instead of the [790], so primarily performance driven. The 350 basis points improvement compared to third quarter instead of 580 is shown on the chart, again, primarily performance driven. So – but this is bridging from where we came and the important point is to recognize that this is where we are now with everything in showing a 50% gross margin business. Margin improvements for the quarter and for the year are substantial and supported by both the products and the services business. The Life Science products business has demonstrated continuous improvement in gross margins all year. This quarter is stabilized sequentially at 44%, which sustained 390 basis points improvement year-over-year. The Life Science services business provided 54% gross margin in the quarter, reflecting the higher revenue and improved labor utilization. And as a reminder, in the third fiscal quarter, we paid a premium to our lab personnel that came in daily through the early days of the COVID environment, and we discontinued this in June as the protocols and the general practices settled into a new normal. Fourth quarter operating margin of 16.2% overall, an expansion of 900 basis points over last year continues to show the leverage of the total business model for Life Sciences. For the full-year, Life Sciences reported $389 million in revenue or 16% increase. As the Alliance revenue did not have a substantial impact until the fourth quarter, we won't elaborate on that too much. However, let me provide you the summary, which I provided for the quarter. Total segment as reported is 16%, but if I exclude the Alliance in both 2019 and 2020 it’d show 18% growth. The products business shows 9% growth for the year, the services business, excluding that Alliance revenue grew 24%. Under the Services business, GENEWIZ provided 32% growth and the sample repository solutions provided 8%. As we look at our first quarter of 2021, we expect life science revenue to be in the range of $105 million to $111 million. This range shows stable revenue from the fourth quarter, and again, it'll support approximately 20% growth year-over-year. Let's turn over to the Semiconductor business on Slide 7. Semiconductor Solutions revenue for 138 million in the quarter increased 31%, compared to the fourth quarter of 2019, and 9% sequentially on the continued strength in the global Semiconductor equipment market. Our vacuum robots and systems growth both sequentially and year-over-year highlight the critical needs for advanced front end equipment OEMs. Our combined Automation products set in total, all-in that's vacuum and atmospheric provided 50% growth year-over-year and 15% sequentially. Revenue in our Contamination Controls business was up 4% year-over-year and Services was up 3%. We maintain our strong market position across all our offerings and view 2021 to likely be another growth year in the market. Meaningfully, Semiconductor operating margins crossed over the 20% threshold for the first time since the third quarter of 2018, just prior to the sale of the Cryo business. And we did it this time with 36 million less revenue, which highlights the value and margin profile of this growth engine. Gross margins in this period expanded 720 basis points, compared with last year. And 170 basis points sequentially. Gross margin expansion on volumes and related absorption helps to drive the gross and operating margin improvements. As we look forward to our first fiscal quarter of 2021, we expect Semiconductor revenue to be in the range of [$130 million to $140 million]. So let's turn over to Slide 8 with summary of cash flow for the quarter. Operating cash flow in the fourth quarter was 52 million. As a reminder in the full-year – fiscal year 2020 column, we paid 92 million of taxes in this year related to the prior year gain on the sale of the Cryo business. So, excluding this one-time payment, operating cash for the year was $129 million, up 25 million compared to the same metric in 2019. Net change in cash related accounts shows a reduction of 36 million, but simply stated, we generated 129 million of cash, and then we paid the 92 million tax bill, we invested 40 million in CapEx, which included 8 million for the Suzhou, China building, which will replace our lease spaces and provide the growth for our GENEWIZ business. We invested 16 million in the acquisition of the RURO software business. This business, by the way, generated 4 million of revenue in the seven months of ownership and was accreted to GAAP and non-GAAP earnings. And then we pay it out 30 million of dividends to our shareholders. Setting aside the tax on the prior year divestiture, our operations afforded the significant growth investments and dividends, while adding 56 million of cash for the balance for future investments. Let's turn over to Slide 9 for a quick view of the balance sheet. You could see the 306 million of total cash equivalents, marketable securities at the top of the year-end column. Looking at the working capital line, I would highlight that except for the 92 million payment of taxes on the Cryo sale, which was shown as a current liability when we first entered the year, we had very modest change in working capital support 24% [growth in the revenue]. The balance sheet remains quite strong as we enter 2021. Let's turn over to Slide 10 for our guidance on the first fiscal quarter 2021. Revenue is expected to be in the range of $237 million to $251 million, with Semiconductor range between $132 million to $140 million and Life Sciences at $105 million to $111 million. Adjusted EBITDA is anticipated to be $46 million to $56 million. Non-GAAP earnings per share is expected to be $0.37 to $0.47 per share, and the GAAP earnings per share is expected to be $0.27 to $0.37. In addition for the fiscal year 2021 we expect the non-GAAP tax rate, as noted on the page between 22% to 26%, and capital expenditures of 60 million to 70 million, inclusive of 25 million as we complete our Suzhou, China building project. And before we turn the call back over to the operator for question-and-answers, I would reflect a little more on the view of our future. As most of you know, again, our longer-term model to which we currently track is 2022 target. It won't take you very long to observe that revenue is on track, gross margin is already running at the target levels of 2022, and OpEx appears a little higher than the model indicates. This indeed is our observation and may warrant adjusting expectations a little bit higher on gross margin, offset with a little bit higher OpEx ratio. We do have great confidence that we are on track for the top line and the earnings per share range we have provided. In fact, some of you may even be thinking to adjust those more positively, but for us, we're still here counting ballots, and we'll stick to those ranges. That provides the compound growth rate of 13% for revenue, and approximately 30% for EPS from the 2020 results, and I think you can see that the momentum is with us in delivering that [rate pace]. So that concludes our prepared remarks. I'll now turn the call back over to [indiscernible] our operator to take some questions from the line.

Thank you. [Operator Instructions] Our first question is from the line of Steve Unger with Needham. Please go ahead. Your line is open.

Great, thanks. Congrats on really a truly exceptional quarter, particularly in Life Sciences. The gross margin, am I seeing that correctly, that’s 50%, and I really didn't think you would get there this soon. I'm going to ask you, is there still wood to chop there in 2021? And what should we think about as far as reinvestment, now that the margin is, you know, 50% or higher? Are you expecting now to dive into more expansion of your commercial teams or research and development?

You know, Steve, it's a really good question, and it’s a multi-layered equation behind gross margin. Of course, in the early part of the year, the products’ business kept taking up cost quite a bit, and we gained a lot of traction on cost takeout. But throughout the year, we also captured a lot of value in our offerings with our customers, meaning in some cases on products we stopped discounting some and held our price and value, but in other cases we provided more sophisticated higher value offerings in total. So, we've described the hub strategies, we've described the special care in the custom offerings, Sample Management, and of course in the GENEWIZ space, we described to you the proprietary capabilities that we developed in the ITR space. So, all of these do translate not just to higher demand, but also higher value margins. So, when we see these things happen, it's energizing to us and yes, it does keep our team thinking and developing new ideas, new innovations. We have maintained our operating expense investments behind our R&D line in the – particularly in GENEWIZ and in our services based around the integration and the value that we can provide as a total offering there. And I think most notably, I think we’ve captured the attention of the spaces around cell and gene therapy and that's got value wrapped around it. So, I think all of these contribute. I think when you say is there more wood to chop, I just want to make sure it's not misconstrued. I think we'll continue to always as a company have the inherent habits of taking out cost, but at this point it's more about the growth of the value offerings, more about developing those proprietary edges, and demonstrating the value in the marketplace.

Great. And then my second question is in Life Sciences and the BioStorage area, are you still carrying a backlog of projects to implement, and with the recent resurgence we're seeing in COVID are you expecting to hold? Are you getting access to implement those systems? And then what is your outlook for BioStorage? I know we're going to start distributing vaccine products. Is there opportunity there for Brooks to be a part of that on the distribution or administration side?

So, my instincts are that, I think you’ve read it correctly, but let me just correct some of the labeling a little bit, so it doesn't confuse people. So, first you're asking about store systems and our ability to install systems and we – that's clearly in our product set and we are carrying some backlog as we go into 2021 that would have definitively been installed and in place or further in progress as without the COVID environment. As Steve noted in his remarks, we signed up new systems and we got systems in progress already and we closed some systems. So, we've been able to close some but not everything and it has slowed us down. So, that's been a headwind for the year and on the flipside, on the product side, C&I has been a nice tailwind and in our assessment, the capture of the customer names there may be a sustaining factor force. COVID is bringing demand, but we think that the relationship expansion is substantive for us for the long-term. Now, if I move over to the storage services or the Sample Repository Solutions, of course we carry some backlog there. What we believe is there is less of a backlog, but customers overall have been reluctant to move let's say archiving and general hygiene things that will continue to pick up over the year, I think in 2021. But we wouldn't call it out as a material swing, what we would say is the engagements that we're driving are still substantial and they carry a lot of upswing on the hub strategies on the vaccine management, but…

So Steve, I'll add on a little bit to that. So, in the – we think that there is a critical place for us in the distribution of vaccines. Right now we do store it for pharmaceutical companies manufactured product and the field finished product that ultimately gets distributed. Our play in the logistics sample will be to hand it to the companies who do that distribution. So, we play a critical link in the middle of the chain and that's a really comfortable place and we think we have tremendous value there because of the precise temperature control, the volumes that we can handle, but ultimately the jets and trucks and the places – the companies that ultimately distribute it to clinics or hospitals will be through parts of the supply chain that already exists.

Yeah, I got it. Okay. That's excellent and then one last one on Semiconductor. Is there any way you can characterize the impact of the export controls on the SMIC? I'm not asking for specific details and things like that, but just perhaps a broad characterization of that impact was for you and what you see it to be?

Yeah, so, Steve. So, right now the impact is that we are cautiously paying close attention to it. The environment that we're in now where licenses are required is an environment that we had years ago. So, it's not new to the Semiconductor equipment industry, but it's something that hasn’t yet had an impact, but how we set the potential that the manufacturer of those Semiconductors will go to another company and then we serve those other companies, but something that we pay attention to but without impact today and it's an environment that we're familiar – all of us are familiar with.

Got it, great. Congratulations, thanks.

Thanks, Steve.

Thanks, Steve.

Thank you. Our next question is from the line of Patrick Ho with Stifel. Please go ahead. Your line is now open.

Thank you very much and congrats on a nice quarter. Steve may be just a follow up on the question regarding China. I'll ask you a little bit differently. Given your growing presence in the region, particularly with the local equipment vendors in China, do you see any changes in their core buying patterns or their behavior? And what I'm kind of getting at is given their localization efforts overall across the Semiconductor food chain, have you seen any changes in terms of – I guess them trying to find local vendors on the Automation side or are your products that differentiated enough where it's going to be difficult for them to make that type of a switch?

Yeah, Patrick we always care about that, but one of the things that we're pretty confident about is the uniqueness of our products. I think almost everybody in the Semiconductor robot business has tried to replicate what we've done. This been going on for 20-plus years and so we think the capabilities we have are really unique. We also do have – we think enough capability in China that might set our products up uniquely to be able to serve China from China. So these are the things that we're exploring from a number of different angles, the connections that we have with customers and the equipment makers in China and Korea they understand that uniquely we provide automation that's going to be accepted by the Semiconductor fabs immediately because it's a brand and a technology that the IC makers trust. And so, I think there'll be a lot of pressure from all sides from the end customers from the equipment makers and certainly from us that we would be able to continue to supply. So, we're really close to it. Our connections with the customers are extremely strong and we spent, there is not a day that goes by when people from our company aren't in contact with the equipment makers in Asia, but we will always watch to see, but we don't think it's easily replicable just to copy the technology. It goes a lot beyond just the hardware and the physical device. It's the experience we have in 800 degrees corrosive environment that controls technology. We have we think a really unique scope. Hope it gives you the answer?

Yeah, it does give the color I’m looking for. The China situation, I think is evolving as we speak so you gave great color there. In terms of my follow-up question on the Life Sciences end, you had a very strong quarter on the services end. It was a mix of both your BioStorage, as well as the GENEWIZ business. Given some of the COVID opportunities are ahead that you mentioned in terms of the logistics, the transport, and the cold stores, how do you see that potentially being a potential benefit, or a driver for synergies on your product then? Are there opportunities for automated storage systems that you can quote, sell to some of the middlemen that you mentioned?

We think they likely are Patrick, we'll have to see. It's going to come back in – we're talking about billions of samples to start, and so, likely as soon as products are manufactured, they'll ultimately be distributed, and given to patients. So, short of that people will be looking for extremely large volumes. It won't be individual freezers, and necessarily stores. It might be entire rooms, but we do think that in time there maybe applications for that, but right now in the billions of samples level, I think large pharmaceutical companies are managing that by different means.

Great. Thank you very much.

Thanks Patrick.

Thank you. Our next question is from the line of Craig Ellis with B. Riley. Please go ahead. Your line is open.

Hey guys, this is Carlin on for Craig. Congrats on the nice quarter. I guess I want to start with the revenue upside in the quarter. I'm wondering as you looked at the various businesses, what specifically surprised the upside, and what degree of the upside was maybe catch up versus new inflection growth given kind of some of the COVID related slowdowns we saw earlier in the year?

If you went back to our guidance, you would say well your Semiconductor business was kind of solidly in. It's the higher end of the range, but it was in the range, and it was the Life Science business that was over the top of the high-end of our range. And behind that what we did expect GENEWIZ to come back. What we didn't know one was just how solid the NGS and the synthesis business would continue to perform. Sanger came back somewhat on our projections. We saw a modest ramp starting as we referenced three months ago, and we kind of expected it was about to cross over to a pre-COVID level. It's still not gone up to the growth potential it has and had performed that. So we would say it's a touch lower than, had COVID never happened, but it's from the back to end, but really what drove that was the NGS, and the Synthesis services spring stream back. In addition to that, as we highlighted in the products business, the consumables, and instruments came in a bit stronger than what we expected, and I would highlight that we had put some additional capital in behind that, not significant for anybody to think about a sinking capital dollars, but it was additional capital, and tooling to facilitate additional demand in that space, and so we've got that well oiled for additional growth. And we're looking forward for this to continue, but those are the primary areas that generated the upsides that we didn't forecast.

Got it. That's really helpful. And then as I look at gross margin, I just want to follow up on an earlier question. Obviously super strong gross margin in the quarter, even better gross margin in the outlook. I guess as we think about gross margin sustainability moving forward kind of beyond fiscal first quarter, is it fair to say that we've established a new, I guess maybe a new floor, and everything will be moving off of this, or how do we think about gross margin sustainability moving forward?

Well let me address both sides; first Semi and then Life Sciences. And in Semiconductor, I think we've demonstrated this level of gross margin in the past, and went back. So, we think this is pretty typical of our capability, and we think it continues to advance as more, and more people adopt our lead technologies, and more, and more designs, and we demonstrated, and highlighted I guess a lot of design wins, which will be just that, and that will produce gross margin as we progress forward. On the Life Sciences side, I think your characterization is a fair one that there is a new benchmark here for a floor. As I highlighted it's only modestly raised, and it was raised, and modestly raised in proportion from the remix excluding net Alliance revenue, but now we're here with this new mix, and the new performance level. I've always highlighted that GENEWIZ has more of a variations in margins. In the past it was about five point variations, and they’re at the higher end of what I call it now, and so there could be a mixed impact in future quarters, but if it's 48% to 52% range, I would say that's what to expect. 50% I don't think is going to be a surprise if we continue that, but certainly wouldn't want investors to be disappointed of the drop back to 48, and bounce back, and forth in that range. We'll continue to drive forward, and we think we've got a business that will continue to generate value over the next couple of years to sustain something about 50% in the longer-term.

Got it, all right. Thanks guys and congrats on a nice quarter again.

Thanks Carl.

Thanks.

Thank you. [Operator Instructions] Our next question is from the line of Jacob Johnson with Stephens. Please go ahead. Your line is open.

Hey thanks guys, and I'll add my congrats on a nice quarter. Maybe a bigger picture question for Steve, balance sheet is in a really good place, operation seems to be humming along, so would be curious on latest thoughts on M&A, and maybe broader thoughts on capital allocation?

Yeah so I'll add your list there. We have an appetite in there, opportunities for us, so we're pretty active in pursuit, but these things take time, and we're going to make sure that we do something that fits the company, but we have a strong interest, and continue to expand the capability. I remind you as you're well aware the fact that we have GENEWIZ now really expands the view that we have in terms of what fits particularly well. And there was a question earlier. We have really an exceptional sales organization on to which we can put a lot more products, and services, and they're extremely capable. It's one of the reason we're capturing synergies, so we're eager to look at what else we can add to the company, and take advantage of a lot of infrastructure capabilities that will make it successful here.

Got it. Thanks for that. And then maybe just a quick kind of modeling question for Lindon. Lindon just on the RUCDR relationship, it sounds like it was kind of doing $5 million a quarter. As we think about the next few quarters, should we expect this to be a headwind through the first three quarters of FY21, and then obviously then lap it in the fourth quarter next year. Is that kind of the math?

So a headwind and a year-over-year growth rate, yes, but on a sequential basis, it will have about a 1% or 2% headwind in this first quarter, and this can be really nominal. We'll continue to provide a little bit of services, but on the recovery basis. It's not in the same definition of what we do and it will round to zero on a new line. So, I call it a headwind, but we only have a couple of million of revenue in this quarter, as we did that unwinding.

Got it. Thanks for taking the questions.

Yep. Thank you.

Thank you. Our next question is from the line of Paul Knight with KeyBanc. Please go ahead. Your line is open.

Hey guys. Could you talk to the capital equipment instruments side of the Life Science business? What was your growth rate there? And then as a follow on, the vial storage growth rate of 18%, what do you think normalized growth rate is of that market?

So Paul while Lindon is looking up the instrument part, let me just take a crack at the BioStorage portion. We did some modeling. We brought some outside help. I think if you recall, we estimate that the opportunity grows there above 10% per year, so estimates range between 8% to 12%, but I think we zeroed in on something we think, that's about a 10% opportunity growth in terms of samples to be stored.

And when you think about the [BioStores] businesses do think that you can – you need to expand this to more sites per customer demand and you would – can you do that Greenfield versus paying what I think deals demand right now, how do you envision you expanding BioStores?

So, we have a lot of flexibility Paul and so we have a pretty good geographic footprint right now. What we find is that some customers still aren't ready to have the samples off site, but we do a lot of on site management actually. So, we almost set up the capabilities that we have in one of our bio repository inside a customer site and we manage it as if. So, we're very flexible here in terms of how we add value. We're certainly open to additional bio repositories, but we find that once the customer becomes comfortable with the service that we provide management to their samples whether it's in the building next door or in the building a thousand miles away, our ability to manage it and retrieve the samples from the customer put them into our protection and to get the satisfaction of the customer in 24 hours is something customers grow into and it becomes less of an issue once they have the experience. So, we still see a broad range and we offer a broad range of capabilities for customers.

Okay, thanks.

And Paul, this year I'm going to take your question to be everything other than the C&I in the products side of the business, which makes up our storage system our Cryosystems and overall it was down about 8% or 9% for the year offset with that 67% growth in the C&I. And this remember this is where we carry little bit of backlog into 2021 on the store systems and we're seeing nice momentum on the engagement and continued growth in the Cryo space, the automated Cryo system.

Okay, thanks.

Yep.

Thank you. Our next question is from the line of John Pitzer with Credit Suisse. Please go ahead. Your line is open.

Yeah. Good afternoon guys. Thanks for letting me ask the questions. Congratulations on the solid results. Steve you talked about on the semi side of the business still expectations for growth next year at the industry level for WFE. I'm just kind of curious do you think that your record of outgrowing the market stays on track next year? Will next year be a similar rate about growth that you have seen over the last three and if so what do you see driving that?

So, John it will be tough for me to be any more accurate than anybody else on the magnitude of the opportunity, couple of things though. We delivered $158 million in Contamination Control. When we got into that business six years ago the trailing 12 months revenue was about $30 million. So this is a secular growth driver the fact that Contamination Control continues to explode because it's the necessary capability that was not necessary even 10 years ago. So we think that's a considerable driver. If we anticipate that there will be an expansion in Memory, the Deposition and Etch characteristics there will continue to propel the vacuum automation. So, we remain confident just because of the product portfolio that we have to serve the advance semi market and all of the products that we sell for the most part they're all capacity expansions. We believe that the amount of the vacuum automation and the amount of contamination control will be a higher fraction of the WFE and the high market share positions that we have means that we'll capture that and we'll be at a higher growth rate in WFE. So, I wish I could tell you other than the forecast that we get both from the customers and from people like you who forecast the anticipated growth in the market that we feel good about going into 2021 and we're certainly more confident about our position to outperform.

And then Steve as my follow up on Life Science understanding that the situation is very fluid, but to the extent that you are optimistic that a COVID vaccine could represent an incremental revenue opportunity for you guys next year is there any way to seize the opportunity? When will you have more confidence to be able to be kind of be more confident in that opportunity and is it really a function of Pfizer-type vaccine that needs cold storage or would you see any vaccine of COVID providing incremental market opportunity for you?

Yeah, John it's a really good question because we do spend a lot of time on that. We want to make sure that we're not building capacity for one-timer and there are other vaccine – there are other pieces of vaccine business that we have that are not COVID related and so we’ve begun to establish growth vector if you will in the support of that particular area and we happen to be able to apply that also to some of these COVID-19 opportunity so when we talk about what we think is already in our backlog that will give us approximately a $10 million opportunity that's for vaccines generally some of that is COVID for 2021 and we do treat it as [additive]. We're already full speed ahead on the course that we have related to the Sample Management and the other bio repository business we have all of the lab services we provide we do treat the COVID opportunities as additive and we want to make sure that we haven't defocused from the biological sample business that really is the heart of all that we do.

And Steve just for my own education on the vaccine distribution is the key characteristic cold storage or does it not matter?

It's cold storage and it matters a lot, so we also have transport capability, so we can – for example, in the catalyst example they have us both transporting and storage and then re-transporting when they ultimately want to send that on to the people who will do the final distribution of their product, so we perform those function in that cold chain at pretty significant volumes.

Perfect, thank you.

Thanks John.

Thank you. And there are no further questions at this moment. I will turn it back over to you if you have any closing remarks.

[Indiscernible], thank you very much. Everyone, we so appreciate your attention and these are really tumultuous times for everyone and the fact that we’ve got two essential businesses that keep demanding our offerings, our attention. It really energizes us as a team. Safety is always our first priority for our employees and for our customers in fact as we operate on their premises and we'll always rank that number one, but it's full steam ahead for us, and we feel like we have the momentum behind us out of this last year, the demand. We're making the investments to step-up to this environment and we're quite proud of our teammates and at the same time we're looking forward to these new opportunities to step-up and be part of the solution. So, with that, we look forward to talking to you next quarter and welcome to our 2021 fiscal year. Thank you very much.

Thank you ladies and gentlemen. That does conclude today's call. We thank you for your participation and ask that you please disconnect your lines.