Good day, ladies and gentlemen, and welcome to the MKS Instruments Reports Q1 2013 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Seth Bagshaw. You may begin.

Thank you. Good morning, everyone. I'm Seth Bagshaw, Vice President and Chief Financial Officer. And I'm joined this morning by Leo Berlinghieri, our Chief Executive Officer. Thank you for joining our earnings conference call. Yesterday, after market close, we released our financial results for the first quarter of 2013. You can access this release at our website, www.mksinstruments.com. As a reminder, various remarks that we may make about future expectations, plans and prospects for MKS comprise forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in yesterday's press release and the company's most recent annual report on Form 10-K and most recent quarterly report on 10-Q, which were on file with the SEC. In addition, these forward-looking statements will represent the company's expectations only as of today. While the company may elect to update these forward-looking statements, it specifically disclaims any obligation to do so. Any forward-looking statements should not be relied upon as representing the company's estimates or views as of any date subsequent to today. Now I'll turn the call over to Leo.

Thanks, Seth. Good morning, everyone, and thank you for joining us on the call today. I'll give a recap for the first quarter, as well as our outlook for the second quarter. Following me, Seth will go through the details of our quarterly results and guidance, and then we'll open the call for your questions. Semiconductor forecasts are improving. However, as I said in the last call, global uncertainty continues to keep the economic recovery in check. Our first quarter revenues of $142 million came in toward the upper end of our guidance range and increased 6% from Q4, with sales from the semiconductor market up 21% to $90 million. Sales to all other advanced markets were $52 million, down about 13% from Q4, when we had the benefit of several unexpected orders for the solar and industrial markets and also reflecting continued weakness in some markets. In the second half of 2012, we witnessed a significant drop in the semiconductor capital spending, but conditions stabilized in the fourth quarter. So far this year, we have seen signs of recovery from those levels. Throughout Q1, the semi book-to-bill ratio has been above parity, a level not seen since May of last year. In the semiconductor market, the trends of miniaturization, constant communication, embedded intelligence and faster speed continue to drive increased semiconductor use, and these trends propel technological advances, as well. Larger wafers, thinner layers, finer geometries, new materials and 3D structures are required to cost-effectively meet the needs of new semiconductor applications. As I've mentioned in previous calls, our strategy for success in the semiconductor market is to gain new design wins by working closely with semiconductor OEMs as they develop new tools and processes to meet the more stringent technological requirements and to improve productivity. This past quarter,…

Thank you, Leo. First, I'll discuss the Q1 results before providing further details on our Q2 guidance. As Leo described, even though the global economy continues to be unsettled, we did see improvement in our semiconductor markets, and as a result, revenue for the quarter was $142 million, an increase of nearly 6% compared to Q4 revenue of $134 million and a 26% decrease from $191 million a year ago. Revenue for the quarter was still at the high end of our guidance range, primarily as a result of improvement in the semiconductor business in the latter half of the quarter. Q1 gross margin was 38.6%, which was within our expectations at this volume level. This compares to 39.3% in the fourth quarter. As expected, non-GAAP operating expenses increased in the first quarter and were $49.4 million compared to $45.1 million in the fourth quarter of 2012, which was an especially low level due to shutdowns and other temporary cost reduction actions. Q1 operating expenses also reflect typically higher fringe costs in the first quarter and more normalized work schedules in the U.S. Q1 research and development expenses were lower than our expectations in the quarter due to timing of certain project material, consulting expenses, which were deferred to the second quarter. As we mentioned in the past, certain of these costs can vary from quarter-to-quarter based upon project timelines and other factors. Our non-GAAP operating profit margin was 3.7% of sales. Non-GAAP earnings were $3.8 million or $0.07 per share compared to $5.1 million in the fourth quarter and $22.9 million in the first quarter of 2012. GAAP net income was $5.8 million or $0.11 per share. The GAAP tax rate for the quarter was a benefit of 16% due to a benefit of $2.4 million recognized in Q1…

[Operator Instructions] The first question is from Krish Sankar of Bank of America.

A couple of quick questions. Leo, in terms of Q2 guidance, can you give the directionality of the different segments? How much do you expect semi to grow to, like 10% to 15% in Q2 from Q1 levels, and what about the non-semis?

So Krish, we would expect that probably the majority of the growth will be in semi. You might see some of the non-semi business come back a little up as it was down a little in the first quarter. So there are a lot of segments than that, but you can see a little bit of that. But primarily, I would consider semi.

Got it. And then in Q1, on the semi recovery, did you see a uniform recovery as the quarter progressed? Or was it more front half, back half loaded, any such color?

I think we saw a little more in the second half than we did in the first half, but it wasn't some significant acceleration so that -- it looks like a steady gradual increase in second half.

And is that second half momentum continuing into Q2? Or what do you see so far when you one more in Q2...

We base our guidance on what we see, so I think you'll get some indication that we think that, that rates will continue at least to be up to get the increase in Q2.

The next question is from Josh Baribeau of Canaccord.

Could you provide us with maybe a little bit of where you think that a lot of your exposure is, the breakdown, let's say, between IDM, foundry and memory or do you not have that line of sight?

Yes, we don't -- a number of the tools are used in many different, the same applications -- the same tool is used in a number of different device types. And so we wouldn't necessarily see that.

Okay. And is that -- for a similar question, do you have any line of sight into whether it's a 28-nanometer process or a 20-nanometer process and logically [ph]?

And not necessarily. Although what we tend to see is, the smaller the geometry, there tends to be more precision requirements, and we'll see more process control overall, but not as people are ordering. They're ordering a large number of line items, and some of them are consistent across different technology nodes as well.

Is there a way to quantify the relative capital intensity between different nodes? Is it up 5%? Is it up 20%? Or is it too soon to tell, let's say, between 2020?

I think it's too soon to tell.

Okay. Anything to report or any exposure in OLED this quarter?

Nothing significant to report at this time, although I think there has been some activity in Asia that certainly looks promising for this year.

The next question is from Patrick Ho from Stifel. Patrick J. Ho - Stifel, Nicolaus & Co., Inc., Research Division: Leo, in terms of the non-semis business, I know a lot of it can be lumpy, and as you mentioned, cyclical in some of the segments. Which of those different areas do you believe could see the first signs of a recovery? Or where do you see strength in -- at least as we head into the June quarter? Are there pockets where you expect a little bit better than what you saw in Q1?

Patrick, I think it's kind of difficult, and let me explain why. With the solar and LED and sort of the LCD DNS at historically low levels. I guess, we're not anticipating solar or LED having any significant change in Q2. Some form of FPD [ph] could be impacted in Q2, but we're not -- again, we're not expecting any significant increase. Then in those other markets, there are so many customers on a worldwide basis, and you're not talking about $10 million customers. You're talking about $100,000 customers, and lots of orders are made up in those other segments, whether it's industrial or whether it's in chemical, or whether it's environmental. So I think that we don't predict that. We look at it as a run rate from where it's been. So I think that a comment we made that most of the increase comes from semi, and the only reason we say that some of that might come from some of the other markets is that it was slightly down -- even when you pull out the unusual orders we got in the fourth quarter, it was still slightly down a bit, and those tend to reflect the economy and just the activities that are going on in different markets. So they may come back a little, but I don't think we have an exact expectation. Patrick J. Ho - Stifel, Nicolaus & Co., Inc., Research Division: Okay, great. Now, that's very helpful. Going to semi side for a second, in terms of -- I know we've discussed this and I mentioned in the past about inventory levels at your OEMs, obviously, by your guidance, it sounds like things have worked themselves through on that front. Do you believe this pickup that you're seeing now from an inventory basis, is the inventory build by the equipment vendors? Or is it purely now that they're taking it off demand?

What was interesting, Patrick, was with a great 21% increase in semi, was a great sign of things recovering. If you look at what was released so far, it looks like the major equipment companies actually reduced inventory. So theoretically, it would say that they consumed more than they bought, if they have less inventory. But we can't tell if it's our parts or somebody else's or what inventory they're talking about, but that's a good sign that most of the major OEMs decreased their inventory, while we saw this increase in the first quarter.

The next question is from Tom Diffely of D.A. Davidson. Thomas Diffely - D.A. Davidson & Co., Research Division: I'd like to focus on the model of the cost structure at this point. It seems like margins with the guidance are at kind of multi-year lows here while the operating expenses have crept up over the last couple of years. I'm just kind of curious that this kind of longer-term trends are here give us a weak earnings guidance on the revenues?

I think, Tom, in the first quarter, it's mix-driven, and also you'd expect that when semi ramps up, some of the larger cost gets better pricing. That's a factor as well. And then, foreign exchange is a piece of it as well. I did mention in the past calls, and again, I'll mention it now, is we have some capacity in the factories right now. And so if the business picks up, we don't expect to add a lot of indirect labor and all great costs to meet the additional ramp in the business if that does occur. So the margin right now had some impact on a negative basis.

I think typically, we've seen incremental margins of around 50%. I think, over some period of time, we'd expect that to happen again.

Exactly, exactly. Thomas Diffely - D.A. Davidson & Co., Research Division: Okay. And has your long-term model changed as far as what you think profitability is, at the $200 million, $250 million level?

No. Thomas Diffely - D.A. Davidson & Co., Research Division: Still kind of mid-40s margins?

Yes.

[Operator Instructions] The next question is from Jim Covello of Goldman Sachs.

This is Mark Delaney on behalf of Jim Covello. I was hoping you could help us understand a little bit of the impact of your business model as it changes. As I understand it, more of your business is moving into less cyclical areas, such as industrial markets. And how do you think about managing your capital allocation strategy as your cyclicality of revenues changes?

Well, I think, as I said earlier, those are relatively small customers. It's not huge swing in the business. It's just part of the overall. And I think, what we were inferring to is that there's probably not a lot of cyclicality in the next quarter since the most cyclical businesses like semi are either on the upside or at all-time lows. So I don't -- I still think that we believe that over the long run, LED market will recover and be a good piece of the business. I think solar can be part of that at some point in time, certainly FPD. So I wouldn't see that this would be a huge mix change that would change the capital structure.

And that's great, correct. Yes, so -- as you know, Tom, we've got dividend, we've got a share repurchase plan that we've executed on, and we do want to retain some capital for M&A activity, and we have bought 2 companies in the last 6, 7 months outside the U.S., using cash outside the U.S. as well. So we haven't changed. Our model is still intact.

The next question is from Larry Dayton [ph] of Second Line Capital [ph].

I came into the call late, so if I missed something, I apologize. But in terms of M&A strategy, any update kind of in the non-semi area to try to expand any frustrating experiences or positive experiences that kind of matter out?

Well, one of the things we mentioned in the call, if you got on late, is we did acquire a microwave -- industrial microwave company, relatively small company in Europe, but it gives us -- we are in the microwave plasma business, primarily focused on the semiconductor market. This technology gives us the ability to look at microwave applications in non-semi industrial areas and should augment what we have today for technology. So -- and Seth just mentioned, we're continuing a part of the cash that we do hold, our expectations, we're optimistic about those kind of opportunities. Nothing particular right now that we could announce.

But to the extent that it's really hard to get a deal done, is it hard to find the assets you want, or is it mainly valuation, or is it something else?

I think that M&A is always difficult. It's never simple, and so we've exhibited patience. I think we've exhibited in the deals we've done to create value in the businesses, we've looked for them to be strategic to our business plan. So I kept confidence that if we look at enough things to find the right things that you can do a good deal in. So I'm confident that we can find those things. We put the right resources in place, we have the right way to look at those things. So I think our patience and our success in the past, I think, will continue going forward.

And just one separate question, in terms of solar, I really found out that you can see what looks for 2014 to be a significant better year?

Yes, we're not anticipating anything significant, although I think -- although if you look at the general market data, I think they're talking about 11% growth over the next couple of years on, as I said, almost nothing, so I'm not sure we're raising flights right now in solar, but it's nothing in the foreseeable future, the next 12 months or so or 18 months that we'd see there'd be any significant change.

Thank you. There are no further questions at this time. I'll turn the call back over for closing remarks.

Thank you. We are continuing to strengthen our infrastructure and technical capabilities worldwide to keep us competitive and responsive to the needs of our customers. We are encouraged about the improvement we're seeing in the semiconductor market. However, in that term, we anticipate the business conditions for other markets will remain challenging. We're optimistic about long-term recovery, and we are continuing to work closely with customers on design wins and are continuing to make investments to position ourselves for the long-term growth. I'd like to thank you for joining us on the call today, and we look forward to updating you on our Q2 call in July. Thanks.

Ladies and gentlemen, this concludes today's program. You may now disconnect. Good day.