Ladies and gentlemen, thank you for standing by. Welcome to the Brooks Automation Q2 and Fiscal Year 2016 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 conference is being recorded Thursday, April 28, 2016. I would now like to turn the conference over to Lindon Robertson, Executive Vice President and Chief Financial Officer. Please go ahead.

Thank you, Mike, and good afternoon, everyone. We would like to welcome each of you to the second quarter financial results conference call for the Brooks fiscal year 2016. We will be covering the results of the second quarter ended on March 31, and then we will provide an outlook for the third fiscal quarter ending June 30 of this year. A 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 the call. 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 actual financial results 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 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 and should future financial data or events occur that differ from the 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 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 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 Chief Executive Officer Steve Schwartz. We will open with his remarks on the business environment and our second quarter highlights. Then we will provide an overview of the second quarter financial results and a summary of our financial outlook for the quarter ended June 30, which is our third quarter of the fiscal year 2016. We will then take your questions. During our prepared remarks, we will from time to time make reference to the slides I mentioned, available to everyone on the investor relations page of our Brooks website. 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 are pleased to have the opportunity to report the results of the second quarter of our fiscal year 2016. Q2 was an all-around strong quarter. We delivered the improvements we had forecasted, and we saw strength in our businesses across the board, including higher gross margin and profitability. Revenue increased to $135 million, up 13% from Q1, made up of a 13% increase in BPS, a 27% boost in life sciences, and a modest 2% decrease in our global services business. Entering Q3, we forecast another quarter of growth in each of our segments. In spite of this strong result, I am sure that the headlines are already highlighting an $80 million loss related to the reserve against our deferred tax asset. I am going to leave that topic for Lindon to address and I will focus my commentary on the operational results and our preparation for the future. For the past few years, we have been focused on building two strong business platforms: semiconductor and life sciences. As a means toward that end, we have purposefully double-taxed the strong semiconductor business. We have reinvested in semiconductor new product development and entered critical new market segments that enable growth, even in a market that is consolidating and slowing. In this endeavor, we've been very successful, as demonstrated by the rapid growth in our vacuum automation segment, fueled by the acceleration of deposition and etch process steps, and compounded by our share gains with all Tier 1 and most Tier 2 OEMs. We have also grown the combination of backend advance packaging and contamination control solutions from less than $10 million three years ago to more than $85 million this year. In addition, we used the profits,…

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, which is a consolidated view of our operating performance to start the remarks. Top-line revenue increased 13% sequentially to $135 million, driven by improved demand in the semi industry and a full quarter of revenue contributions from the completed BioStorage acquisition. For earnings, let's address the GAAP results first. Gross margins improved, and both R&D and SG&A expense lines were reduced. Driving the GAAP bottom-line loss are really two events in the quarter. First, as announced on March 7, we have restructured the business significantly, removing executives and employees and changing our management structure. The decision to do so was predicated on the readiness and capability of each segment to move forward with less oversight. We foresee no negative impacts to our offerings or revenue. In fact, we believe our customers will benefit by more integrated sales and service management team that is already living a daily discipline of meeting the customer needs. In the quarter, we took a $7 million charge in the restructuring line and expect approximately $16 million of annual savings from the reductions. We saw approximately $1 million of this benefit in the second quarter results, and expect $2 million of incremental savings in the coming third quarter. As we enter the fourth quarter, the full run rate of savings will be in our results. The second impact is on the tax provision line. We increased the reserve against all remaining net US deferred tax assets on our balance sheet as of March 31 by approximately $79 million. As a result of the restructuring charge that we took in the quarter, the second quarter yielded a loss for the…

Thank you. [Operator Instructions] One moment please for the first question, which comes from the line of Patrick Ho with Stifel Nicolas. Please go ahead.

Steve, first on the semiconductor side, with your contamination control business, typically I think the initial penetrations would be leading edge logic and foundry customers for that product. On the memory side of things that you mentioned, are you seeing a bias towards DRAM or 3-D NAND initially?

Patrick, thanks. At the moment, we just got informed that we won some time that business, actually. So we have some manual tools still in DRAM fabs, but automated tool now heading to 3-D NAND.

Right. On the life sciences end, with the BioStore III product and you talked about many evaluations that have hit since the beginning of the year, now you're going to start seeing some the revenues come in over the next few quarters, can you give a little color of the type of customers that initially took those systems? And where are you looking to expand from a customer base off of that initial penetration?

We put the first tools in eight different kinds of customers, if you will, Patrick. So this is bio-bank, pharma companies, biopharma, university, and even a veterinary research hospital. So we wanted to make sure that we could sample different kinds of customer environments. I think the feedback has been strong from all of those. We anticipate that some of the build-out will be for the bio-banks that store tissue samples. So we think the initial penetrations will be for people who really need to store below minus 150 degrees C, and we anticipate that those will be for biopharma companies and for some of the tissue banks.

Great. And maybe just as a final follow-up off of that question and answer, typically new products have lower margins, just because you are trying to get the initial penetration. You've got some higher warranty costs. As you start hitting volume with some of these initial customers, can we expect to see margin improvements with BioStore III that will obviously translate positively to the life sciences business?

Right out of the chute, Patrick, we think these are good products. So from a margin standpoint, all the tools started up in a day, each of them. They are modular, almost appliances, so they have been very dependable so far. So we don't think we will have surprises from a field standpoint. And the price and the cost we think will contribute positively right out of the chute.

Great, thank you.

Thanks, Patrick.

The next question comes from the line of Farhan Ahmad with Credit Suisse. Please go ahead.

Thanks for taking my question. Can you just remind us again, how do you expect the profile of profitability to improve in your life sciences?

I'm sorry, how the line of profit -- could you repeat the question?

The profitability -- like, if I remember correctly, you had guided last quarter that second half of this fiscal year you expect to be profitable. And I just want to get a sense of do you still maintain those targets of the new growth in life sciences and profitability growth?

I understand, thanks, Farhan. In life sciences, we had described that we would be hitting breakeven in the third quarter and that we would be hitting a positive profit at the operating income level in the fourth quarter. By the way, behind that, we said that in the second quarter we would reduce our first quarter loss in half. So our first quarter loss, $4.2 million, and then this second quarter, we brought that down to $2 million, and in fact we cut it in half. And we believe we are very much on track in the second half. And I will say this, I think we have very clear line of sight to profit in the fourth quarter. And we are seeing exchange rates move from the time that we had that call last time. So we are just going to be a little nip and tuck if we get all the way to breakeven in the third quarter. But that is still our target in the third quarter to get to breakeven.

Got it. And then in terms of your legacy business, it was only $10 million of new orders in the quarter. Seems a little bit light relative to your historical level. So what's going on in your legacy business in life sciences?

Yes, Farhan, I think it's a really good question. And keep in mind that the first quarter we had $30 million in the first quarter. So combined for the first half $40 million, and it is a lumpy business. But what we are seeing is, as we focus on the model of the business, the consumables business and the services business is quite stable. And again, the storage business, very lumpy. And a bit more up-and-down than we would like to see that we are comfortable. But as you started to see, as I mentioned, we had 4% revenue growth this quarter because we're building some of those systems now. And we are seeing really good customer satisfaction out of these systems that are going in from last year. So we remain very confident in that legacy business. 40 million orders year-to-date. And I understand -- and we put it out there for you. We try to be very transparent with this 10 million. But then I draw your attention to the fact that we had another $28 million of bookings out of the BioStorage business. So we had $11 million of revenue there, but $28 million of new contract value. Now, that's a different kind of contract value, because it goes out over a number of years in terms of storage. But again, very revenue steady revenue coming forward.

Farhan, I will add that even though, as we know, the large store business is pretty lumpy, it is quite unusual that there would be no large stores awarded in a quarter. So some of the things that we are tracking pushed, we believe, into the current quarter. And again, unusual, but as Lindon said, big quarter in Q1, low in Q2, and we are still facing a very healthy pipeline.

Got it. And one last question on the semi side. Your orders there in your BPS and services declined quarter on quarter, and your commentary is second half revenue was unlikely to grow. So I just wanted to ask, is it reasonable to expect that September revenues might be flattish, maybe up slightly, just because the orders declined sequentially?

Actually, the decline was very, very modest in the orders, quarter to quarter. But as we referenced in my remarks, the contamination control systems, this is an unusual -- in our industry or in our business. But we saw some of the revenue in this quarter that we had a shot at delivering. We ended up not taking this quarter. This is not our choice; and we look to the criteria of GAAP. And some systems required final customer acceptance. So we shipping a little more and some of that revenue is going to be delivered -- or I should say be recognized in the coming quarter, presuming that we have customer signoffs, and we will, I'm sure.

Got it, thank you, that's all I had.

The next question comes from the line of Edwin Mok with Needham and Company. Please go ahead.

Hi guys, this is Arthur [ph] calling in for Edwin. Thanks for taking our questions. The first one is on your commentary on advanced packaging. Saw that it was up 10% this quarter and that you expected a modest decrease in the June quarter. So you had some confidence that advanced packaging would be ramping back up into the second half of calendar 2016. Just kind of want to get an idea of what you're seeing in the marketplace, and what is going to drive that growth in that segment.

We know that the TSMC line took a lot of capacity, and so it's understandable that a lot of us shipped product into advanced packaging. So necessarily, we think June will be down. But we believe before the end of the calendar year that there will be some more capacity put in, in Taiwan and perhaps in China as well.

Okay, thanks for that. And then within your life sciences group, you built up a good portfolio of life science products. Just wanted to get an idea of where you are seeing the strongest demand, and where do you think there are some other areas that could drive additional growth?

On the life sciences side, a lot of the -- a majority of the samples that we store in BioStorage are from North American based pharma companies, biopharmaceutical companies, research institutions. So a majority of that business is right now North America based. We've expanded BioStorage facilities in Europe and in Asia, two different sites in Asia. So we have the capability and capacity to continue to expand. And we are seeing growth from all of those regions. But the majority of what we will recognize here, based on the orders that just came in, will come from North America. From a storage and consumables standpoint, those are distributed around the globe. Most of that is in Europe and North America. But the first of the BioStore III cryo systems that we shipped actually went to China. So we are seeing expansion just about everywhere that life sciences people see growth in their business. We participate as well, because there's samples used in all of the research studies that are going on.

Great, thanks for that. And last question is just on the services business. I saw that gross margin came in a little bit. Just wondering, is this just a one quarter blip, or can we expect gross margins to return back to this mid- to high-30% level? Thank you.

Yes, Arthur, I have always said that right average expectation is around 35% to 36%, and I still maintain that. When our revenue is at this level, down in the 22 range, it is going to typically be down in this -- below the 35% range. And it swings pretty quickly if you drop down to this level. And when you are up in the 23.5 and better, you find yourself up in the 36%, 37% range. So I would think for modeling purposes, this is really steady business for us, a little bit light this quarter but I would suggest the right model is to figure an average of 35%.

Thank you.

There are no further questions at this time. I will now turn the call back to you. Please continue with the presentation and/or closing remarks.

All right, Mike, thanks very much. And everyone, we really appreciate the time and the coverage we get from our analysts as well as the interest from our investors. We always invite you to our call and to arrange time with us offline as well. And we will make sure that we service the research that you need that's available in our public domain. So thank you very much and we look forward to seeing you at the end of next quarter.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.