Ladies and gentlemen, thank you for standing by. Welcome to the Brooks Automation First Quarter Financial Results Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions]. As a reminder, this call is being recorded Thursday, February 5, 2015. I would now like to turn the conference over to Lindon Robertson, Executive Vice President and Chief Financial Officer. Please go ahead.

Thank you Grant, and good afternoon everyone. We would like to welcome each of you to the first quarter financial results conference call for Brooks’ fiscal year 2015. We will be covering the results of the first quarter ended on December 31st, and then we’ll provide an outlook for the second fiscal quarter ending March 31st of this year. The press release was issued after the close of the markets today and is available at our Investor Relations page of our website, www.brooks.com as are the illustrated PowerPoint slides that will be used during the prepared comments during today’s call. I would like to remind everybody that during the course of the call, we will be making a number of forward-looking statements within the meaning of the Private Litigation Securities Act of 1995. There are many factors that may cause actual financial results or other events to differ from those identified in such forward-looking statements. I would refer you to the section of our earnings release titled Safe Harbor statement, the Safe Harbor slide and the aforementioned PowerPoint presentation on our website and our various filings with the SEC, including the Form 10-K for the fourth quarter ended September 30, 2014. We make no obligation to update these statements, should future financial data or events occur that differ from forward-looking statements presented today. I would also like to note that we may make reference to a number of non-GAAP financial measures, which are used to in addition to and in conjunction with results presented in accordance with GAAP. We believe that these non-GAAP measures provide an additional way of viewing aspects of our operations and performance, but when considered with GAAP financial results and the reconciliation of GAAP measures, they provide even more complete understanding of the Brooks business. Non-GAAP measures should not be relied upon to the exclusion of the GAAP measures. On the call with me today is our Chief Executive Officer, Steve Schwartz. We will open with his remarks on the business environment and our first quarter highlights. Then we’ll provide an overview of the first quarter financial results and a summary of our financial outlook for the quarter ended March 31st, which is our second quarter of the fiscal year 2015. We will then take your questions and during these prepared remarks, we will from time to time make reference to slides I mentioned available to everyone on the Investor Relations page of our Brooks’ website. So with that, I would like to turn the call over now to our CEO, Mr. Steve Schwartz.

Thank you, Lindon. Good afternoon everyone and thank you for joining our call. We’re glad to have the opportunity to report the results of the first quarter of our fiscal year 2015. Today I’ll briefly cover some our key accomplishments and results for the quarter and then give some specifics about our next actions and outlook. In the December quarter, we continued to advance on all market and product fronts. We gained more market share in important growth segments and we’re particularly pleased that our two most recent acquisitions delivered strong above planned performance. However, total revenue came in later than our expectations which left earnings at the low end of our guidance. But even with the top-line shortfall, all elements of our business remain intact for a good 2015. Our growth strategy continues to be validated by our customer wins and share gains in important markets. But we do have some hurdles to overcome to be certain that we capitalize on the opportunity that we’ve created. For us, it’s all about execution and delivering on the tremendous potential that exists. We do forecast revenue growth of approximately 8% but we also forecast approximately flat earnings per share while we complete some operational improvement initiatives and important restructuring actions. After that we expect to be back to a more normal drop-through for profit from revenue. I’ll now give some color on the results of the quarter. In the quarter we continue to advance our semiconductor product portfolio and market position. Our BPS products group revenue grew 5% quarter-over-quarter led by front-end semi business which increased by 13% over the September quarter. As the semiconductor business continues to strengthen, we believe that our strong product line-up provides us the opportunity to grow above the overall rates that’s expected for the semiconductor…

Thank you, Steve. Please refer now to the PowerPoint slides available on the Brooks website under our Investor Relations tab. I draw your attention to slide 3, the consolidated view of our operating performance to start the remarks. Top line revenue was flat compared to the prior quarter at $123 million, as a decline in Life Sciences was offset by growth in our Brooks products solutions business. Gross margins were weak this quarter in Life Sciences as Steve noted, we will cover more on each business - on each of our business units in the segment charts. As a reminder, we closed our acquisition of FluidX at the beginning of the quarter that business is included in our Life Science systems business. This acquisition as well as the April Acquisition of Contamination Control Systems or CCS was accreted to our overall gross margin levels and to the non-GAAP EPS in this quarter. We continue to be pleased with the addition of each of those businesses. Let’s look now at our segment revenue briefly outlined on page 4. Brooks’ products solutions grew 5% sequentially. As Steve described vacuum robots and contamination control solutions were key drivers here. Within that product solutions group, we did have some headwinds with the normal seasonality of the industrial segment which uses our Polycold offerings deep in the manufacturing supply chain for smartphones and tablets. We also saw that paused this quarter in the advanced packaging space. We had seen good growth in the advanced packaging in the two prior quarters and our team sees a clear path of growth here in the next two quarters, which is why I use this term pause. In Life Sciences, revenue was down 17% sequentially as our base business was lower than expected. However, FluidX offset some of this…

[Operator Instructions]. And the first question is from the line of Edwin Mok with Needham. Please proceed with your question.

Hi, thanks for taking my question. So, first question on the Life Science side, on the restructuring you guys mentioned that you take some costs out of model. Any way you can kind of give us some rough idea on breakeven after you reach, what is your breakeven revenue level after restructuring? And you mentioned that within a few quarters to kicked-in, is it more linear cost improvement across this year or how you’re thinking about that?

On the restructuring Edwin, we have, this quarter was $2.7 million. So I would estimate that the payback on that is going to be about close to, well, less than a year but it will be about more than $0.5 million of savings on a quarterly basis. Your question on breakeven, it moves for us because we have the Life Science investments. So it has to take to put a number on table at this point. But here is our focus. Our focus is to continue to reduce the structure that our semi business is running on. And we’ve been improved that point. And our breakeven point on our Life Science business while we lost money in this quarter is something, we’re very focused on in getting back to as we move through the year.

I see. So, with a bigger mix of consumable or service revenue on the Life Science now, is it - why are you doing restructuring, is it also that you need to actually invest in yourselves or service organization to support that? And would that cost slow down your comp improvement in make on the offering line?

So, Edwin, the addition on the sales for example for the consumables is a pretty quick return. You build that out incrementally. And so as the market opportunities expand, the sales people can capture it. So, generally the cost that we incur there, are covered by the incremental sales. And what we do is we watch the sales people as their territory or their region, the opportunity they have continues to grow. That’s when we add people to it. So generally those costs go with that, generally those costs grow and are covered by the revenue and gross margin. From the services standpoint, generally we follow the installed base and we’ve been pretty successful selling service agreements with the tools as they go out. We’re selling upgrades, we’re selling software upgrades so there are number of things that we do again, where our revenue goes along with the cost structure, we don’t have to build out costs for services either in advance of being able to cover those costs.

I see, okay. Lastly just on Life Science, just quickly you guys have this target of $80 million revenue over this year or within fiscal ’15, is that’s still the target right now?

Yes, Edwin. We stand by that right now. We had a slow start in the year for sure and we’re going to have something like that in the March quarter, Dusty’s got his work cut out for him. He’s got that as a target and he’s working to pull that through how we get the backlog balanced against that’s going to be our challenge. But we’re not given up on that target yet.

I see, okay, that’s fair. And then just quickly on the product, Brooks product business group. So on the Polycold side is that just seasonality, I don’t remember every year this quarter you always weakness on that part anyway, but eventually how you balance that as you get to March and beyond. So, is that how we should think about that? And then, I guess, two last questions. The second part is, you mentioned that AP revenue came down a lot, is that just a call of timing thing or you worry that revenue is not materialized in this year?

Yes, so Edwin, couple of things. One, the Polycold is exactly the same circle for Brooks we’ve seen for the last years. And interestingly, almost the same revenue level for the December quarter. So, we don’t see any difference in the seasonality of that business. And so that’s pretty consistent. So we saw December behave like it did. We do see the business coming up some in March and generally June is a stronger quarter, we don’t have so much visibility to that. But that’s what the seasonal pattern has been. Edwin, sorry, you mentioned which revenue had come down, we didn’t catch that?

The second part is, I’m sorry, advanced packaging?

Advanced packaging?

Yes, what’s going on there?

Yes. So we saw advanced packaging drop by almost half in the December quarter. Our forecast and our build plans are forward to rebound somewhat this quarter. And then be even higher in the June quarter. But indeed we did see advanced packaging down. And as I mentioned in my comments, we’re not as certain about the size of that opportunity as we once were as, it’s a little bit clouded by some of the Tier-1 OEMs who ship our products into some of their backend market share gains.

I see. Last question I have. Taken to your guidance, what kind of - how do we start to think about gross margin?

In that guidance we expect good improvement coming back this quarter. As we’ve said, it will take a little bit of time to get out from under some of the cost pressures we’re seeing in the installation stages of Life Sciences. But we’ll see a significant improvement as our expectation, perhaps not all the way back to the 40% to 45% target that we established but most of the way. And we expect that BPS returns to a more normal level as well.

Great. That’s all I had. Thank you.

And the next question comes from the line of Craig Ellis with B. Riley. Please proceed with your question.

Thank you for taking the question. The first is, just a clarification on the shortfall and Life Sciences in the quarter, with base systems and consumables. What was the cause of that with that deals that were pushed out or went to a competitor, what was the variance?

So, Craig, actually we had shortfall a little bit from a number of elements of the business, some was from systems. But probably the one that had the biggest impact was the instruments and consumables and devices from the regular course of business, not FluidX. FluidX really was outstanding and these not only met their numbers, they had one of the best quarter they’d ever had in their history. But we’d anticipate it more from the consumables and devices and instruments, and it just didn’t come, it didn’t come through. Those are things we can turn pretty quickly. We’d anticipate that revenue would be a little bit higher and it didn’t come through in the December quarter.

Thanks Steven. And Lindon on the optimization program in the same segment, how much of the benefit is expected to come through in the COGS line versus OpEx for the $1.5 million that you’re looking for two quarters out?

Yes. Most of that will come, actually I guess, I would say, about two thirds of that will come through the costs and then about a third through expense. It’s going to spread across the Life Science segment. And I would emphasize that the restructuring that we discussed this quarter, it had a little bit of but more of that was on other parts of our business. It wasn’t as much of the Life Sciences. So the Life Sciences actions that we’re talking about something that we’re going to be executing between now and the time we get to that September quarter that we talked about. So, a key point there is, that is an integration effort really of the sites that we’re carrying in Life Sciences. And I think we’ve talked about this before, our focus there has been integrating the - on the platform which we did with the Twinbank development. And we’ve turned our focus toward integrating the sites. And frankly there was a caution here now with Dusty here there is a lot of clarity of exactly which direction we want to go on the integration of this. So I think it’s helping us quite a lot with his leadership.

Okay. Gross margin question in global services, 37.2% were there any one-offs there? And related to that, is that a sustainable level or should we expect to move back towards 35.5%?

I’ve been extremely pleased with the last three quarters of the margins in global services. My expectation is this generally is between 35% to 36%, I keep pressing them that, they did it for me this quarter, you guys do it for me again. But I wouldn’t suggest to you to model it 37%, I would say 35% to 36% is where we would have a general momentum. This quarter we are observation as did have some materials under run, I wouldn’t call it one time Craig, I just recall a little bit of the mix of the business that we participated in.

Thank you. And then lastly from me, a longer term question for Steve on product solutions. Steve, I think a quarter ago you were thinking it was a business that could outgrow the industry this year. Is that still your view?

Yes, we really think so Craig. We’re bullish on the slots that we’ve taken if you will with contamination control solutions and the vacuum robotics really set to outgrow other elements of the business will grow with the business. But we feel very confident that we’re in a position to outgrow.

Thanks guys.

Great.

And the next question comes from the line of Patrick Ho with Stifel Nicolaus. Please proceed with your question.

Thank you very much. Steve, maybe first a question in terms of you highlighted on the semiconductor side about some of the increasing capital intensity trends related to Edge and deposition. As you see those market trends transpire, do you also see new opportunities where you can gain additional share from corporate captive capabilities that these suppliers have or is it more just benefiting from the number of tools that they’ll be shipping over time?

Yes, Patrick, we do see both actually. So we’re - on next design tours, we probably had more wins and a higher percentage than any time in the company’s history. Over the past four quarters, we penetrated a very large Japanese OEM for - to replace their captive robots not just on too difficult platforms but also we’re working with them on even replacing the common platform robot. And in the quarter, I might not have been clear in my comments, in the quarter we actually won another legacy CVD robot from Tier-1 OEM where we replaced their captive robot on a pretty high volume runner. So, we continue as we perform at the next generation products, we continue to have opportunities to go into legacy products with really dependable vacuum robots. And we’re benefiting from both of those things. So the growth in the market itself and as I mentioned, compounded by some of these newer wins on older products if you will.

Great, that’s helpful. Maybe sticking one more question on the semiconductor side of things. Obviously you’ve seen the pick-up on the OEM side of things with the tool vendors. Are you also seeing sustainable growing trends on the chipmaker side given that there are several fair projects that need to be filled out over the next couple of quarters?

Yes. Patrick we’re seeing it, we’re on the edge here. We anticipate that if the fab commitments are made that we’ll have orders. But we’re on the edge between how much material do we order, how ready do, we get so we can meet some of these delivery requirements which we know will be short. But we were in pretty close contact. We understand what the demands will be we’re not as clear on the exact timing. But we are getting prepared at the fabs where there is 16 and 14 nanometer and even smaller production, the things that we do specifically and directly for those fabs which include lots orders and the CCS products that will definitely benefit the business.

Great. And a final question on the Life Sciences side. You mentioned the services business, there are some of the opportunity is there. Given your expertise and your long-experience in the semiconductor side, there is obviously different kind of I guess variable on services front. What are the Life Sciences customers looking for on the services side that you can provide that others can’t?

Patrick, a few things. One, when we move to automated systems, suddenly we’re talking with the customers about workflows as opposed to discreet events where we couldn’t add quite as much value. For example, when there was always a manual insertion and retrieval of a sample from a cold store, the kinds of things that we’ll be able to do to guarantee the temperature, to guarantee their reliability samples, to guarantee the safety and security of the samples are the kinds of things that we can offer that weren’t available to the marketplace before but are direct results of the products that we bring to the market. And Dusty has a lot of experience here growing a very successful services business at Brooks and Elmer. And the principles and practices and things that he’ll bring to the team will just continue to enhance that. So we’re bullish about the opportunity. We’re laying it out and defining it. But you will see that includes more, not just about the physical handling of samples but also the logistics and informatics that go along with delivering secure samples. So we’re encouraged by what could be, but just what we’ve been able to accomplish in the last 12 months has made us, enabled us to make the services organization much more productive than we have been.

Great, thank you very much.

Patrick, I think I’ll add to that too. Because we’ve seen a lot of momentum over this last year, we’ve talked about at some, just on the global presence that we have in the service field as well, supporting the sales of our system. And there is a tremendous amount of momentum and synergy between those two. I think our customers have highly valued Brooks having a global presence and capability to service various markets readily and being near them. And you can see the evidence of that as I’ve highlighted in the past on service contracts that we signed with the upfront sale of the system more so this past year than ever before.

Great. Thank you very much.

Thanks Patrick.

[Operator Instructions]. And the next question comes from the line of Jairam Nathan from Sidoti. Please proceed with your question.

Hi guys, thanks for taking my question. First, I might have missed this but did you explain, given the revenues increased wisely the EPS kind of declining?

Yes, so, Jairam, if you noted in this prior quarter here that we just discussed, we had a benefit from foreign exchange as well as we had income tax benefits in this quarter. And we don’t project that to happen in this coming quarter. So while we’re trying to get some revenue growth and we’ll see some return of margins in the Life Sciences. It doesn’t quite offset getting the, say, of getting income tax benefits as well as the FX. So, we’ll also face just a little bit of expense in, I always hate addressing this but in the March quarter of the year, two things happens with us. But we just have the little bubble of expense as we pay our board on an annual basis in that quarter. And we also have above or on our payroll expenses, tax expenses. So, by the end of the year, not everybody is paying a favorable tax, so they’ve already capped out. So we just have a bubble that we always face this time of the year, and that puts a little pressure on it as well. But that’s, that was out over the year.

Okay. And Steve, just on - with regards to the agreement with Chart Industries, can you guys give us some more understanding of how your revenue will flow? Is it, do you, I’m guessing you use their distribution networks, do you kind of - should we expect the same amount of operating margins from the products that are sold through Chart?

Yes, so Jairam, I can’t go into the details yet. We’ll be clear after we are able to launch the product. But our intention and our target and our path is that you’ll see this similar kinds of operating markets for the revenue we recognized from the products that we sell with Chart.

And you see, would you be recognizing what you sell and they are recognizing what they sell or would it be like a joint effort?

Jairam, we have us in Chart and our channel partners. And after we work out not just two but three of the parts here, we could communicate a little bit more clearly with you. We’re still in discussions on how all of this will flow. We’ll be as clear as we are able once all the contracts are in place.

Okay, my last question.

A little bit fast for us yet, but we’ll be clear as we launch the product.

Okay, okay. And lastly, on, over the past two or three years, Brooks has seen a decline in revenue primarily because of Samsung putting their capital-spend a bit here on the logics side. And as Samsung is reportedly winning some more Apple business and so do you see that reverse a bit here?

Yes, Jairam. It’s, we won’t comment on any specific end users. But I think as you’re aware, as Korean suppliers spend more, it drives a specific portion of our business as we supply to a lot of the Korean OEMs who have very strong presence in the Korean fab. So, again, we can’t get down to that level of granularity but absolutely Samsung drives an outside portion of our business.

Okay, thank you. That’s all I had.

Thanks Jairam.

And the next question comes from the line of Farhan Ahmad with Credit Suisse. Please proceed with your question.

Thanks for taking my question. My first question is on the product gross margin. If I look at the trend from September of 2013, the gross margins back then were about 38% and they have declined every quarter and now they’re close to 34%. So, I just wanted to get a sense of like what’s happening there? And also, if one of your big customers has been talking about using more of the Japanese suppliers and the yen has the value that it is putting some pressure on pricing?

Yes. So, I think one thing Farhan, you need to do in the gross margins that you’re looking at, is looking on a continuing operations basis. We’ve done some changes in our portfolio so I just caution you on that. And either of you is fair to ask us questions and I’m not only just saying the question but just on an absolute basis in our portfolio of 2013 the product solutions margins increased from like 32% level up to by the end of the year of 36%. And now we’re looking at this level, that 34%. So, we truck with from this 36% kind of 34% in this quarter. And as we’ve explained I think this, returns. So, I think essentially you saw a strong improvement through ’13. And then in ’14, you saw us make some portfolio adjustments and we’re investing in the CCS business, we’ve just seen that come up and we expect more revenue energy from that business. We’ve also seen on the Life Sciences as we’ve explained in more detail here that we generally expect 40% to 45% below, clearly running below that in the low 30s now. But we’ll be bringing that back. So, that’s the trend I see, recall but we did, make the sale of the Granville-Phillips business last year, three times revenue we got $87 million back to the shareholders for investments in strategic businesses. So, that was the trade-off that we made and I think most of our investors appreciated that trade that we made in the portfolio.

Hi, Farhan, it’s Steve. I just wanted to comment also on the nature of the strength of the yen. In the days when we had a larger atmosphere of robot portfolio we likely would have suffered some pricing pressure there. But as we’ve spoken recently, the atmospheric robot portfolio is quite small now from Brooks standpoint on the systems and on the vacuum robots who really don’t - we really don’t compete against Japanese competitors there. So, we neither see the, either a pressure or a benefit from that as we stand alone in those particular markets.

Got it, thank you. And then in regards to your OpEx trajectory going forward, like if I look at the OpEx, obviously like you have made lot of acquisitions and have been risking a lot to grow the business. How should we think about OpEx going forward over last one year, I see the OpEx has grown about 5%-ish and how should I think about OpEx over next year?

Yes, it’s a fair question. So, remember, we’ve added two acquisitions and so that’s kind of fair amount of the operating expense increases this year on our quarterly run-rate. And our objective is when we take an acquisition where there is synergies we exercise those synergies. So for example, the contamination control business, we took on an additional structure initially. And what we said is we acquired that over a two-year period we would integrate more of this both in the sales and the operations. And so, over that period of time, you will see us pretty much fully absorbed inside our structure I expect, both on an expense G&A structure as well as an inner-cost structure. It’s been really, I would add to that by the way, we got tremendous teamwork and integration with our team to meet in Germany they’re so very happy with us thus far. On the FluidX, it’s just a little bit different because it’s a different business right now, I mean small in terms of the engine that it’s provided. We are taking that and looking to leverage that equation in energy that they have in two directions. One, take more of our consumable business follow with that channel was well into model our business after that. But secondly, to take their product and expand their channel reach. So, in that case, we would expect more investment behind that, more so than synergistic reduction. So that would be an investment area for us. And we see growth in FluidX coming back as we said in very first quarter of ownership it’s accretive at the non-GAAP level. And I believe it will get accretive at the GAAP level very shortly. So, now, overall in operating expense, I’ll remind you that our objective is to keep…

Got it. And just one clarification in regards to the June shipment level looking flat. Was that specific to the semi-business or was that kind of for the overall company?

Specific to semi, Farhan.

Got it. Thank you. That’s all I had.

Thank you, Farhan.

And the next question comes from the line of Ben Rose with Battle Road Research. Please proceed with your question.

Good afternoon. Question either for Steve or for Lindan. Just looking back at the sales patterns in the Life Sciences business over the last several quarters, can you comment on the level of repeat versus new customers either quantitatively or qualitatively?

Yes, so I’ll start, Lindon is going to maybe look through some specifics Ben.

Okay.

Generally when we sell systems to customers they do an install. So we get all of the systems if it’s one or eight systems, we get all those in a single order. And with very few I would say, maybe a handful of instances, a customer already has an automated cold store from us that they filled up and they come back for another one. But often they’ll plan that in advance. But a few times we’ll have an incremental one. And it’s generally incumbency is very important but capacity is what drives another store. And generally it will take a customer, a year, two years, three-years sometimes to fill a store. But we do have a number of customers over 15 years old installed base with multiple systems at even in multiple locations.

Okay.

I’ll just add to that not a lot more specific but some additional context. I mean, we have more than 100 customer relationships in that space. And it is as Steve said it’s an incremental capacity but not something they add on a semi-annual or even an annual basis. We estimate that in general, about half of our business or a little more is from the pharmaceutical space. And so they continue to add and they have multiple locations. So it’s not unusual for us to be working on more than one project for a pharmaceutical company or to have them come back in the same year for a different location. On the other hand, if you look at the fastest growing part, the customers are in the Biobank space and could be around the cell research. And so in those cases, it’s first time. And those large installations we wouldn’t see nor would we expect it to come back within the next one, maybe even two years. But we do have ongoing service contracts with them.

Okay. And You mentioned with regard to the U.K. Biocentre project, do you believe that most of the cost absorption for the project is behind you and then you start to see some margin improvement on the implementation in the next couple of quarters?

Well, we won’t talk about specifics of our accounting to you, but just a remind-in in general. We do share that our practices percentage of completion. So the cost impact to some degree will be with us until we finish that project and the fact that the margin is on that contract gets realized as we complete it. However, when we have a cost increase in the middle of the project like this, you realize the percentage already been completed in more than half way through, so there is a little bit, I hate to refer to the sketch because it’s not a change to part period, it’s just that the total project you recognize more of that cost in this current period. But it will, that’s why we say we’ll carry a little more into next quarter, it takes a little while for us to get out from the P&L impacts of this. And we still have more revenue to deliver in systems to close in that space this coming quarter.

Okay, sorry. And then finally, on the FluidX, I know you had mentioned at the time of acquiring the company. And you alluded to some of your goals going forward. A big goal I suppose was increasing their sales in the U.S. and with a strong quarter that they just reported, was some of that in fact from the U.S. or is that still to be realized going forward?

Yes. I would say the benefits that we’ve seen so far is their existing channel.

Okay.

So, if that’s very pleased, both with the team they did as in the example we set inside Brooks and how to get that done. And they’ve really leveraged the channel by half. We’re still looking at the strategic opportunities and how fast to expand them through other channels. And that’s something that’s near the top of the list for Dusty as he’s completing the framework of this business model going forward.

Okay, thanks very much.

Thank you.

There are no further questions at this time. I will now turn the call back to you Mr. Schwartz. Please continue with your presentation or closing remark.

Thanks Grant. Thanks everyone for your interest in Brooks. We do look forward to speaking with you when we report results from second quarter of fiscal 2015. Thanks very much.