Ladies and gentlemen, thank you for standing by. Welcome to the Brooks Automation Q1 Fiscal Year 2017 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, Wednesday, February 1, 2017. I will now turn the conference over to Lindon Robertson, Executive Vice President and Chief Financial Officer. Please go ahead, sir.

Thank you, George. Good afternoon, everyone. We like to welcome each of you to the first quarter financial results conference call for the Brooks’ fiscal year 2017. We will be covering the results for the first fiscal year ending December 31st, and then, we will provide an outlook for our second fiscal year, which will end March 31st of this year. A press release was issued after the market closed this afternoon and is available at our Investor Relations page of our website, www.brooks.com as are the illustrated PowerPoint slides that we will use 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 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. 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 measure, 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 first quarter highlights, and then we will provide an overview of the first quarter financial results and a summary of our financial outlook for the second quarter ended March 31st. We will then take your questions at the end of those comments. During our prepared remarks, again, we will from time-to-time make reference to 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 first quarter of our fiscal year 2017. After a strong finish in September to close out fiscal 2016, we’re off to a fast start in 2017. We completed a very successful first quarter with revenue of $160 million and earnings per share of $0.25. Bookings came in at $187 million and gave good support to our positive outlook, as you move into Q2 and Q3. Our semiconductor position continued to strengthen as measured by gross margin improvements, market share gains, and increased profitability. In life sciences, we delivered a sixth consecutive quarter of sequential growth, and we added to our already impressive list of customers. As planned, our product portfolio initiatives are delivering more opportunities, which we expect to drive profitability. Today, we’ll provide a summary of the results from our December quarter and give some color as to our expectations for the March quarter. I’ll begin with the recap of our life sciences business performance. Once again, the life sciences business performed as we had expected in the interim. [Ph] Reported revenue for the quarter increased 5% sequentially from September to more than $33 million, and again delivered positive operating income. Most significantly, bookings came in at a very healthy $64 million, and the mix of business was balanced across the offerings. This is a testament to the investments we’ve made in the strong and complete sample management portfolio and in building a very capable global sales team. Here are some highlights from the quarter. Helped in large part by our acquisition of BioStorage Technologies, revenue was up 60%, compared to the same quarter one year ago. On an organic basis, revenue was…

Thank you, Steve. Please refer now to the PowerPoint slides available on the Brooks website under our investor relations tab. Start the remarks, I would like to draw your attention to slide three, which is a consolidated view of our operating performance. Our top-line revenue increased 2% sequentially to $160 million in the first quarter of our fiscal year. GAAP based earnings per share came in at $0.20, an increase of 31% compared to the fourth quarter. And the GAAP results, we have $1.8 million special gain recognized on the closure of BioCision equity investment. Reduced restructuring charges in this quarter provided additional momentum to the bottom-line. On the non-GAAP side of the page, adjusted earnings per share is up 12% to $0.25. I want to highlight that we have remove the special gain that I just mentioned from these results. Revenue growth and lower operating expense drove $1 million or 6% improvement in operating income. Non-GAAP gross margin was 36.3%, approximately 0.4-point softer than the prior quarter. Improved gross margins in the semiconductor segment were offset by lower gross margins in life sciences. We will go further into this in a moment on the segment pages. An additional $1 million improvement in net income came from strengthened joint venture earnings. Our Japan-based UCI joint venture contributed $2.4 million of income, approximately $0.03 of our EPS line in this period. This joint venture with ULVAC produces cryogenic pumps used in the manufacturing process of OLED displays. The offsetting 300,000 loss in the joint venture line was driven by the negative income from equity in the BioCision business. We will no longer see the segregation going forward from BioCision as we dissolve the BioCision equity investment in the final terms of acquiring their Cool Lab business on November 28th. Newly acquired…

[Operator Instructions] And our first question comes from the line of Edwin Mok with Needham. Please go ahead.

Hey, thanks for taking my questions. Congrats for the great quarter. First, I have on the semi-cap side. Steve, I just wanted to clarify, did you say that you expect your June quarter be as strong as your March quarter for the semi-cap business? And among the drivers that you highlight, what are driving that strength in the June quarter?

So, Edwin, we know March is going to be strong, and what we’re getting as signals from our customers is that we need to be prepared for kind of a same level of activity in June. So, orders always come a little bit later, but supply chain ramps have begun. And so, we don’t anticipate a big fall off to queue up for June. So, it’s little bit early to call it, but all the requests we’re getting from our customers is we are able to sustain in June like we are in March.

Okay, that’s helpful. I think Lindon mentioned in his prepared remarks that you guys got an order for the CCS system or the shipment of CCS system to a memory customer. Can you talk about a memory opportunity for this business? I think historically, you guys are predominantly foundry and logic, just curious how do you think about -- is that really sem [ph] expansion story behind this offering?

Yes. So, Edwin, I think the memory is still going to be a lot less than we see in foundry and logic. But we have four memory customers right now, and shipments are few tools as opposed to tens of tools. But we don’t know where that will go ultimately and we don’t know also about the complexity of the multi-layer 3D NAND. But right now, we look at memory as a modest opportunity, certainly a transistor formation; it’s pretty critical, but we’re not sure if it will drive any additional expansion. But, it’s going to be a good steady business for us but not like foundry.

Okay, great. Let me ask you a question on the life science. You mentioned that you have signed much larger deals with more bundles. I was wondering the stat -- is there any risk on pricing because customers want to buy more from you of these different surfaces, they might be asking [indiscernible] and should we start to -- is there any concern that that might ultimately have some -- put some pressure on margin?

Well, we haven’t seen any so far. I think the customers actually, Edwin, at this point are pretty delighted to be able to get capability from us that could serve a lot of their need. So, it’s not a pressure point so much; it’s really take on more things that they didn’t know we were able to do. So, no, it’s not a price pressure issue; I think it’s a tremendous value add what we’re finding out so far.

Okay. Last question I have -- I’ll let the other guys ask, just on in terms of directionally your gross margin and OpEx for the March quarter. If I understand you correctly, it sounds like you expect gross margin to recover, especially on life science side, but seems like you also expect OpEx to increase in the March quarter. Can you help to clarify that and what’s driving that?

Yes, you read that exactly right. We have some margin improvement we anticipate, driven primarily from the life sciences but we also think will have little strength on the semi side; in total we think will be up above 1 point. And then on the operating expense, we are making some continued investment that will be in the life sciences and we are also doing some strategy work to make sure that we grow that business completely.

Our next question comes from the line of Patrick Ho with Stifel. Please go ahead with your question.

Steve, given the current semi environment and the outlook that you’ve provided for March and June, I know your lead times are generally short to begin with. But, do you see any supply constraints on your end, given the activity that’s out there, especially in the entire food [ph] chain? How comfortable do you feel that you’ll be able to meet the strong demand over the next two quarters with your own supply chain?

We’re working really hard but we feel pretty confident that we have good touch points everywhere. But I do hear that the supply chain is pretty strange everywhere. But, we’ve been out months in advance trying to get everybody ready, anything could happen. But I think things are tight, but we’re all working to make sure that we meet the requirements from our customers right now. So, we think we’re prepared, how about that?

Fair enough. Going to the life sciences side, a really strong bookings quarter. I know this is probably something that you don’t have to quantify, but maybe qualitatively talk about. Given your broad product portfolio now that you’re offering, can you give instances where you’re now starting to see the leverage of okay, now a purchasing of the storage solution also leverage some consumable buys and things of that nature. How much of that contributed to the really strong bookings quarter on the life sciences end?

Yes. Thanks, Patrick. Let me give you maybe a little example here. As we’ve been talking with everybody, we have more than 900 active customers right now for life sciences including all of the 20 of the largest pharma companies. We help them manage tens of millions of samples in various ways. And we probably shouldn’t call them samples, these are really priced assets that provide the path for how these guys are going to make cures. And so, they’re critical assets for these companies. And to say, we really don’t have a single solution, for example for the products that we provide to Merck or to AstraZeneca or to GSK, they’re all different. But they’re always tailored to the specific needs and whatever handling protocols they have. And likewise, we do things for biotech and healthcare institutions that are pretty different. So, what we do for Grail and what we do for Duke University are again capabilities that we bring that are similar elements but always packaged pretty differently. But, we do have one, probably one really good example I can refer to is the capability we provide to Bristol-Myers Squibb. So, BMS is a customer for about everything that we offer. So, they are customer of the large automated compound stores; they have our automated BioStore III Cryo systems. And those are both for onsite sample storage. We also provide to them onsite and off-site sample management services through BioStorage and we also provide them genomic analysis solutions. One other capability that they buy from us that something you’ll hear about more as we continue to build out this business is they also use our Informatics software both to manage their workflows and to connect their pretty distributed sample inventory collections that they have around the world. And frankly, they also use our consumables and instruments for collection and storage. So, as we build, this is a pretty broad range of offerings. Some of the large pharma companies are beginning to use more and more of the capability, but we’re also offering this to academic to the biotech companies, and we do see the capability building. So, the reason we think that some of the contracts are getting larger, some of the opportunities are getting larger is because we’re able to bundle these capabilities and really solid workflow issues around these kinds of assets. So, we’re really bullish about it. The customer base is helping us to define what those things are, but as a pretty flexible Company, we’ve been able to put those things together into really high value packaging. And we anticipate more coming.

And final question from me on the BioStore III, the small sample storage where you have the initial slow traction and adoption of it. Do you feel that you’ve not reached that inflection point and that that would be an area of growth for that product in 2017?

It will be growth in 2017, but we haven’t hit the position yet. So, Patrick, I’m going to anticipate the pressure from you every quarter for a while, and we’ll deserve it. But we’re working really hard. But, I think the thing that’s most encouraging for us is we developed a larger capacity version of it, and we sold units to two different cell therapy companies this quarter. And they have a very specific need for this, which is exactly the reason why we defined it. But it will take them some time to evaluate, and we’ll look for the next customers to get into evolution mode. And there is definitely volume capacity behind, but they will have to test this for some months yet. But, we are really positive about the opportunity; we’ll be bigger in 2017 than we were in 2016. That’s not a difficult feat. But, we do want to exit the year with a lot more momentum. We think the right things are happening, the right things happen in Q1, and we will absolutely report every quarter how we’re doing. But I won’t say we have tremendous attraction, but where we have those tools in place is exactly where they should be. So, we’ve got a lot of work to do. But we’re encouraged by it. We have some pretty aggressive objectives for this year, we haven’t led up on them, but we do have work to do.

And our next question comes from the line of Paul Knight with Janney. Please go ahead with your question.

Hi, guys. This is actually Bill on for Paul. How are you doing?

Hi, Bill.

First, just on the life science business with the seasonality associated with the genomic services, could you give us a sense of how much that impacted margins in the business in the quarter?

Yes. Bill, it’s safe to say that we would have been approaching already 40% without that mix impact. We had a little softness in the consumables. So that’s piece of the mix as well, but the BioStorage. We saw this last year in December as well as. Last year, it stood up, because we only owned them for the month of December and it was like half of that revenue that we had last year. And we saw growth on both sides year-over-year -- the full quarter of this year, but it was pretty substantial. And I would tell you, we do not see that we have a margin issue in the business in any one of these segments and some of our investors have been with us for a long time would recognize that we did two years ago. We don’t have that now; we are at that 40% level in a normal quarter.

Got it. And then maybe just back to the commentary around bundling. Could you just talk about whether that has -- those conversations have been happening with existing customers that were either using the legacy products or BioStorage, and just maybe about the cross-selling conversations you have been having with the customers?

Sure. For sure, the conversations are going on with all the customers who are existing customers. So, if they -- Bill, I’ll give you an example. When customer has a cold store, even if they hadn’t been a BioStorage customer, when they get to the point where the cold store is beginning to be full, some of those samples really ought to be archived. And so rather than having them build or purchase another large store, they may be able to free up capacity by taking some of the samples that really ought to be archived and moving them off site into Indianapolis. Sometimes they have a move that they want to do. Sometimes they want to take a distributed collection and centralize it. Actually with every customer, we could have a conversation around additional capabilities we can bring to them. So, if they are services customer or they are infrastructure, conversations to have -- if there is an infrastructure customer, we can talk to them about services. And with almost all of them, we can have the conversation around things like genomics, around consumables, around instruments and informatics. So the richness of the conversations has expanded. And we spent a lot of time training an excellent sales force on the elements of the offering that they are not familiar with. So, we’re learning how to do it. Some people are really excellent at. If we were building a sales team that’s able to have a conversation about the customer’s sample issues, and with almost every conversation, we have something to offer them that will provide a benefit. So, we’re learning how to do it but we’ve had a lot of success so far.

Great, and just one last one. Just strategically, the decision to acquire Cool Labs and bring that in house as opposed to keeping the JV structure, kind of what the rational was that and how that’s progressing? Thanks guys.

So for both us, it actually was a product line that fits exactly into our sweet spot. The founder of the business also had thoughts about what to do with different portion of the business. So, the timing worked out well for something that we’d always been close to and it worked out just perfectly for us to be able to take that part of the business and for the foundry to go off and take the other portion of the business to run that separately.

[Operator Instructions] We have a question from Ben Rose with Battle Road Research. Please go ahead with your question.

Question, I was running pretty feverishly on the vacuum automation commentary that you had. Did you quantify, and I apologize if you did, the revenues from vacuum automation this quarter versus last year?

Ben, we gave the growth rates to give indicative trends, but we don’t split out the elements of the portfolio specifically in dollars.

Okay. And those growth rates were only on a sequential basis. Is that right?

Yes, that’s right.

Okay. You mentioned that there was strength from both the large OEMs and some smaller OEMs for vacuum automation. Looking out regarding the commentary that you had about March and June, is that -- are those kind of stronger indications coming from the large OEMs or from the smaller ones?

Yes, right now from the larger OEMs only.

Okay. And with regard to the life sciences business, I know you’ve talked about restoring a 40% gross margin this quarter. What do you think would be -- what would be a reasonable gross and operating margin target exiting fiscal 2017?

Well, what we had indicated and we still have conviction around is that for the year, we will be at something north of 40%. And so, we just did one quarter at 36%. So, you could take it from there on the arithmetic, but somewhere north of 40%. And I won’t put a specific number on an exit rate. You can see we’ve got some revenue ramp ahead of us with that growth; I think you are going to see improved margins in the second half at the operating margin off of leverage and gross margins I think goes [ph] up above 40.

Okay. And on the operating margin line, any color beyond sort of incremental operating margin improvement?

No, we haven’t laid that out. I appreciate the desire for it. Last fiscal year, in total that operating income was a negative $5 million; we were profitable in the second half of the year but first half, we were down about $6 million. This year, we’re profitable staring off the year and we expect it to continue. We have flexible leverage to improve, but I won’t put a number on it as we continue to make some investments. Thanks.

And Lindon, sorry, just one final question and looking onto the cash flow on slide seven, I think there is a notation on the bottom that $4.8 million was for the Cool Lab acquisition and yet acquisitions are listed as $5.3 million. I’m just trying to reconcile the two figures.

Yes, we had a remaining payment that was just first related to our prior acquisition on an earn-out that was related to our Japan acquisition in the CCS business. But, the bulk of that was as dispersed for the Cool Lab purchase.

There are no further questions at this time.

Alright. Well, we thank everyone for their interest and the time that they spent with us. And we always look forward to seeing as we move through the quarter. And for now, we’ll look forward to talking to you at the end of our second fiscal quarter. Thank you very much, George, for your help.

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