Greetings, and welcome to the Brooks Automation Q1 2021 Financial Results. During the presentation, all participants will be in a listen-only mode. Afterwards, we’ll conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, Tuesday, February 2, 2021. I would now like to turn the conference over to Sara Silverman, Director of Investor Relations. Please go ahead.

Thank you. Malika, and good afternoon to everyone on the line today. We would like to welcome you to our earnings conference call for the first quarter of fiscal year 2021. Our first quarter earnings press release was issued after the close of the market today.

So operator, my apologies, it sounds like we're having a technical difficulty. This is Lindon. Maybe I can continue the remarks here.

Thank you.

Maybe they're not hearing us. We're on. What happened? Hello. Maybe we need to get to other phone line.

Yes.

[Indiscernible]

One moment, please.

Hear me?

You just came back. Are you there?

Yes. Lindon, can you hear me?

Yes, Sara.

Sara, we hear you now. Malika, my apologies. Here in our conference room, we lost sound and we are unclear on whether that's the transmission of Sara or if it was just our audio here in the room.

We will look into that. Ms. Silverman is back. Okay.

Thank you, Malika, and good afternoon to everyone on the line today. We would like to welcome you to our earnings conference call for the first quarter of fiscal year 2021. Our first 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. I would like to remind everyone that during the course of the call, we will be making a number of forward-looking statements within the meaning of the Private Litigation Securities Act of 1995. There are many factors that may cause such actual financial results or other events to differ from those identified in such forward-looking statements. I would refer you to the section of our earnings release, titled Safe Harbor statement, the Safe Harbor slide on the aforementioned PowerPoint presentation on our website and our various filings with the SEC, including our Annual Reports on Form 10-K and our quarterly reports on Form 10-Q. We make no obligation to update these statements should future financial data or events occur that differ from the forward-looking statements presented today. 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 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 highlights on the first quarter. Then Lindon will provide a more detailed look into our financial results and our outlook for the second fiscal quarter of 2021. We will then take your questions at the end of the prepared remarks. With that, I would like to turn our call over to our CEO, Steve Schwartz.

Thank you, Sara, and welcome to Brooks. Good afternoon, everyone. It's a pleasure to be able to report to you today on results from another strong quarter. It's hard to fathom that we're just six weeks away from the one-year anniversary of the first impacts of COVID on the company and all of it's changed so dramatically in the world since then. From the moment we redeemed an essential company, we began to adapt, not only to be certain that we could satisfy our customer demand, but also to sustain growth during this period. More than anything, this past year confirmed the need for our technologies, tested our operational capability, and allowed us to demonstrate to our customers that we can meet their new challenges and opportunities that they presented to us and there were many. So although, we're still in the midst of a very cautious environment, we remain bullish about our future. Today, I'll comment on results from another quarter of record revenue and highlight the key drivers that we believe will allow us to sustain this trajectory. Lindon will give color to a quarter of strong earnings and more importantly, a look at our forecast, which is quite robust. Our market opportunity comes from our unique portfolio of offerings that targets high growth, high complexity applications, where we can differentiate our solutions. We've been deliberate in our approach to achieving double-digit growth and we positioned our unique capabilities to sustain our share gains post-pandemic. In Life Sciences, we satisfied the needs of the research and clinical communities who need to manage and interrogate millions of samples each day with the highest quality and fidelity. Our BioStorage -- bio sample-based offerings are essential capabilities in the discovery pipeline. Similarly, our Semiconductor products of specialized technologies that enable more…

Thank you, Steve. I call your attention to the slides on our website and we’ll begin with a summary highlights on Slide 3. Q1 was indeed another strong quarter. Revenue grew 19% year-over-year, driven by strong double-digit growth in both businesses. With 29% growth in Life Sciences and 11% growth in Semiconductor Solutions, we have added $39 million of additional revenue to the top line over the same quarter last year. Of course, with this level of revenue growth and a business model with profit leverage, you will see significant momentum in earnings. Non-GAAP earnings per share was $0.47, up 108% year-over-year. And under this, you’ll see significantly improved gross margins that are 470 basis points higher than a year earlier. A key point to highlight is that Life Sciences sustained 50% gross margin again. Cash flows also certainly a highlight of $44 million in cash from operations for the quarter and in fact, it’s a record for us for any first quarter when we pay out our variable compensation. Let’s move now on to Slide 4 for details of the first quarter. With revenue up 1% sequentially and 19% year-to-year, the GAAP earnings per share from continuing operations was $0.36. Referring over to the non-GAAP results on the right side of the page, you can see earnings per share for the quarter came in at $0.47. More than double last year’s results, gross margins at 46.3% expanded that 470 basis points that I’ve just highlighted, driven by 590 basis points improvement in Life Sciences and also supported by Semi with 320 basis points improvement year-over-year. The increase in operating expense reflects investments in R&D, driven by engineering projects in the Semiconductor Solutions and in SG&A with additional headcount, incremental structure from acquisitions and higher variable compensation accruals across the…

Thank you. [Operator Instructions] Our first phone question is from the line of Jacob Johnson with Stephens, Inc. Please go ahead, your line is now open.

Hey, thanks for taking the questions and congrats on the quarters or on the quarter. Maybe first question just on the consumables and instruments side of things, obviously, that business has been performing really strong recently. It sounds like there has been some benefit from COVID. But Steve, from your comments, it also sounds like you think this revenue growth will be durable. So maybe can you first comment on the near-term outlook for C&I and then maybe expand on your comments around the durability of those revenues?

Sure. Jacob, thanks. We’re able to bring capacity online. So one of the reasons you say the demand has been strong since the earliest days of the pandemic. We worked pretty hard to bring on some more sourcing so that we are able to have more capacity. So you’re – I think the demand has been sustained and our ability to serve is what’s helped us to drive the business. And in terms of the durability of the business, we have yet to prove it. But what we find is that a lot of the consumables and instruments customers aren’t necessarily coming to us for COVID-specific things, but they just don’t have the source that they might have had in the past. And we believe that because of the number of instruments that remain at a relatively high level we can tell that the lines – the workflow lines are becoming more automated. So we do believe there is a shift here that’s been accelerated by the COVID environment, where some of the workflow lines are extremely high volume and can no longer be done in a manual fashion. I think that’s converting a lot more people to automated workflows. And we do believe that at least we’ll be able to sustain. We hope a significant number of the customers who come to us, who started to use our instruments and our automatable tubes and we think that will be sustainable. We’re going in another year to prove that out, but we feel pretty confident that the customers we have are really high quality customers that are – that we intend to have for a long time.

Got it, got it. That’s helpful. And then, Steve, you also – I heard you talk about cell and gene therapy a couple of times, I think, regarding a couple of different business lines. I don’t know if you guys have numbers, but maybe can you just update us on the revenues you are generating from the cell and gene therapy end market or any other kind of color you want to give around that end market?

So, Jacob, it’s the moment – it’s a question that is – it’s a really good question. We don’t have all the precision that we want. When we track it on a like-for-like basis, we see 20% and 30% growth in the cell and gene therapy, but I won’t say that we’re 100% confident we’re capturing everything nor with the precision that we opt to. So, to give you an idea, these are numbers bright by our calculations that are roughly in the $6 million, $7 million a quarter and that’s up 20%, 30% from what it was a year ago. But we’ll keep working on this one. But it gives you an idea of the magnitude here. It’s healthy, but we think there’s a lot more upside here.

Got it. Congrats on the quarter. Thanks for taking the questions.

Thanks, Jacob.

Thanks, Jacob.

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

Thank you very much and a belated Happy New Year and congrats on the nice quarter. Steve, maybe first off on the Semiconductor side. I think you mentioned in your prepared remarks about the strength, particularly with your top Tier 1 and 2 OEMs, they’re traditionally going to more advanced nodes and more advanced device structures, turns you usually see more advanced packaging type of techniques, how are you seeing the front end shifts to these more advanced nodes driving advanced packaging particularly on year end will you made a lot of inroads in terms of share wins?

Well, there is a lot packed into that. Patrick, let me try a couple of things. One of the things that we observed is there has been a much faster shift from our market leading MagnaTran 7 and MagnaTran 8 product lines. These are products that have been in the market now for more than a decade. We launched – less than two years ago we launched the MagnaTran Leap, which is a next-generation vacuum automation capability that takes us down below – at 7 nanometer and below. And the speed with which customers have transformed to this new model has been way beyond our expectations. And I give you an idea, in the September quarter to the December quarter, we shipped 4 times as many units of the MagnaTran Leap as we did – in December as we did in September and it surpassed the number of MagnaTran 7 and MagnaTran 8 robot. So it was a – it’s an overwhelming shift. And so we know the demands are there. We know the capabilities that we brought are really significant. What we see on the advanced packaging side are related. Now more than just handling a complex substrate, we see the same kinds of low contaminant, high-precision handling requirements in advanced packaging that we used to see only in the front-end. So we’re seeing more challenging environment and it’s just a continued strong demand for the products that there’s not a lot of overlap. There’s not a – we don’t see as much Tier 1 in the advanced packaging as we do Tier 2, but the breadth of the Tier 2 players and they do spend front-end and back-end advanced packaging much more so than we had even two years ago.

Great. That’s helpful. And maybe as my follow-up question, you had really strong business trends on the services side in Life Sciences. And I think you mentioned a lot of the GENEWIZ opportunities that you saw during the quarter. Can you give just a little more color on the sample storage management services business, whether anything COVID-related or additional biopharma potential uses of the sample management services in this type of environment?

Sure, Patrick. So we – generally we had good increase in the amount of storage. You think everyone’s aware for the past 18 months, we’ve had a pretty significant effort on the what used to be called the BioStorage business on our ability to continue to capture more collections and to enhance the storage capacity and capability in customers and I think we’ve been very successful there. On the COVID-related activities, indeed not just from a vaccine standpoint, but with six different companies, we’ve now begun to store the COVID positive samples. And so managing those collections has been a new and interesting challenge for us. And even in the most recent quarter, we started to have opportunities for automated stores, where the samples from patients will be taken and later when they're deemed to be positive or negative, those samples are then three hours to sorted out and so we're using automated stores for that purpose too. So across the portfolio, on the sample management side, we're seeing different opportunities to help to deal with the COVID sample. So it's a breadth of capabilities and a breadth of opportunities. I won't say any one of them is moving a couple of million dollars at a time, but they are significant in our ability to adapt our products and services to serve those immediate applications has been really strong so far.

Great. And maybe final question for Lindon in terms of cash flow generation or the outlook as you go into 2021. With a strong Semi environment, with the Life Sciences business now also starting to turn positive, especially on the upward momentum side of things, how do you look at cash flow generation given the working capital metrics look very good? Is this a potentially record setting year in cash flow generation for the company?

Yes, Patrick, that's exactly what we expect. And I think the last two quarters, if you look at the two quarters, Q4 and Q1 combined, we're just a few million short of $100 million in that last six months. I think you're seeing indicative capability of the business going forward. So we're quite pleased about that. It's converting to cash. It's fueling our ability to invest, not just organically, but to put some on our balance sheet for potential M&A as well. And so we're really pleased with that.

Great. Thank you very much.

Yes. Thanks, Patrick. Appreciate the call.

[Operator Instructions] Our next question is from the line of Paul Knight with KeyBanc. Please go ahead. Your line is open.

Hey, Lindon, what was organic growth? What was FX impact in the quarter?

Paul, give me a second. It was a couple of million, but it will break that out in our 10-Q. Let me say this, you'll see it in the 10-Q broken out when it's filed, but it's a modest impact.

Did you talk to COVID impact, Steve?

No, we didn't talk to COVID impact.

Right. What I highlighted was I had roughly about $10 million of positive tailwinds in the Life Sciences business in the quarter. And I have mentioned that it was substantially driven by the consumables and instruments.

Around COVID, Lindon?

Yes, that's right. Consumables and instruments, automation is a piece of that, but we had supply capabilities, where others didn't, and we also saw an attraction for high volumes driving a desire for automation capability and the tubes that we produce work in temperatures all the way to minus 190 and have automation-ready caps, barcodes on the side, 2D barcodes on the bottom, which is not necessarily an industry standard, it's a little bit of a differentiation. So capability there is quite strong, and this is why, as we highlighted, we've picked up more than 100 customers in the quarter and some of those undoubtedly were COVID-based customers that weren't finding supply other places and our aim is to delight those customers with the experience they have with us. So we expect we're going to keep them, particularly with the automation capabilities.

Why you would…

Paul, I want to make sure that we're clear on this one too. We have some of those C&I customers who might be buying consumables from us that are not for COVID, because COVID is always the first priority. So if we have a customer who need something for COVID, they get the first priority. But if they could no longer get some of their consumables because another supplier had prioritize COVID and they can buy another tube from us for their continued research, we count that in COVID-related demand that came our way.

Right. And then lastly regarding GENEWIZ, the expansion in China, where specifically, what's the square footage, what's potential contribution and timing thereof?

Yes. What I'll highlight to you is it's a significant building size. It replaces the existing four lease bases that we have in Suzhou, China. It provides us almost double the capacity in the first phase building and we have a second phase build -- when I say double what we have in Suzhou, currently, which is our second largest operational site in terms of capabilities next to our New Jersey site. And with that said, two more years later, we have the option to and likelihood to add another building on the same property. It's a Phase 2. So we have another significant step in capacity capable there. And I'd just highlight, it may not be something on everyone's radar, Suzhou is often described as sort of the Cambridge of China. It's a life science rich district. When you ride through Suzhou, you see company after company in the life science market. So resources are rich, the science is rich, capabilities, the infrastructure is beautiful. So we're really pleased with that. We expect that building to go operational by the end of this calendar year or before.

Okay. Thank you very much.

You bet. Thanks, Paul.

Thank you. And there are no further questions. I would like to turn the call back over to Lindon Robertson for any closing remarks. Thank you.

Thank you, Malika. And to everyone, one -- again, we count ourselves very fortunate in the businesses that we've positioned ourselves with, but also in this environment. We continue to hone the business. You've seen the acquisitions that we did this last quarter. We continue to apply the same rigor to our investments. We continue to grow out the business with on the investments organically as well and you could see that in our results and very pleased with the leverage model. We're excited about the ramp ahead of us, both on the Semiconductor side that seems to be a very prime environment going forward. And of course, on the Life Sciences side, it's not only -- we help to solve -- be a participant in solving the COVID challenges, but also the growth around the exciting space of cell and gene therapy and other research endeavors. So we count ourselves as vital to both spaces and we've been fortunate that all authorities around the globe have counted us vital and deemed us essential throughout this period. We look forward to producing another quarter of results that we've described and look forward to talking to you through the quarter and see you next quarter on the earnings call. And with that, thank you all for your participation.

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.