Greetings and welcome to the Brooks Automation Q4 2019 Financial Results Conference Call. [Operator Instructions] As reminder this conference is being recorded, Wednesday November 6, 2019. I will now like to turn the conference over to Mark Namaroff, Director of Investor Relations. Please go ahead, sir.

Thank you, Chris, and good afternoon, everyone on the line today. We would like to welcome you to our fourth quarter and yearend fiscal 2019 earnings conference call. Our earnings press release was issued after the close of the market today, and is available on our Investor Relations website, located at http://brooks.investorroom.com, as are our supplementary PowerPoint slides that we'll be using 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 Security 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 to you to the sections of our earnings release entitled Safe Harbor Statement, the Safe Harbor slide on our information 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 our forward-looking statements presented today. Also today we will be referring 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 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 President and Chief Executive Officer, Steve Schwartz; and Executive Vice President and Chief Financial Officer, Lindon Robertson. We will open up the call with remarks from Steve on and highlights of the fourth quarter on the fiscal year. Then Lindon will provide a more detailed look into the quarter and fiscal yearend financial results and provide a summary of our financial outlook for the first fiscal quarter of 2020. Then we will take your questions at the end of the call. Before turning the call over to Steve, I would like to remind everyone that we've completed the sale of our Semiconductor Cryogenics business on July 1st, the first day of our fiscal fourth quarter, reporting and commentary in this quarter focuses on our continuing operations. And with that, I would like to turn the call over to our CEO, Steve Schwartz.

Thank you, Mark, and good afternoon everyone. We're pleased to report to you results from another strong quarter. Give you some summary comments about our performance from our fourth fiscal 2019 year and provide you with thoughts on our outlook for fiscal year 2020. Q4 captained another strong growth here for Brooks. Revenue of $200 million was up 25% year-over-year, driven mostly by the addition of GENEWIZ with organic growth overall in spite of down some equipment environment. For the full fiscal year revenue up $782 million was up 24% over business segment. As we’ve detailed for you over the past year we completed two M&A transactions in fiscal 2019 including the sale of our semiconductor cryogenic packing business and acquisition Of GENEWIZ. With [indiscernible] activity we’re main focused on our ongoing business and we delivered exceptional growth. We gained more market share across the board and we’ve answered technology and market leadership positions in both the semiconductor and life-sciences markets. We are keenly focused on growth and leadership on our markets, we believe we have positioned each of our businesses in vibrant markets with growth opportunities and we’ve invested in the advancement of our technology solutions to solve our customers’ most critical problems while we further distance ourselves from competitors. As we’re too many weeks from our analyst and investor day when we had a chance to give considerable exposure to our business segments. I use my time today to give highlights from the business and our thoughts about how we see fiscal 2020 shaping up. I begin with Life Sciences, we had an outstanding growth quarter in Life Sciences with revenue of $94 million, up $6 million or 7% sequentially. With strong contributions from Sample Management and GENEWIZ. And $94 million Life Sciences represented 47% of revenue for…

Thank you Steve and I refer you to the slides on our website. I'll start with summary highlights on slide 3. On a full-year basis our 2019 revenue was 24% higher than 2018 supported by growth in both segments of semiconductor and life sciences. Our full-year operating margin expanded 130 basis points as we saw performance improvements in each of our segments. Semiconductor and the life sciences sample management business results each improved year-over-year and we were further supported by the addition of GENEWIZ to our portfolio. And we ended the year on a strong note with Q4 delivering revenue growth and margin expansion to. Revenue grew 25% year-to-year fueled by life sciences with double-digit organic growth and sample management, a strong pro form of growth in GENEWIZ. The semiconductor business provided relative stability compared to the industry with just a modest decline year-over-year. I will give you more color on the details as we go through the charts. Our Q4 operating margin expanded 140 basis points compared to one year ago. This improvement was driven by life sciences which recorded 580 basis points expansion year-over-year while semiconductor operating margins were stable on lower revenue. Cash flow from operations followed suit with a strong Q4 finish. We're reporting operating cash flow of $33 million for the fourth quarter but this includes absorbing $13 million of deal fees related to the closure of the semiconductor cryogenic sale. Excluding these one-time fees adjusted cash flow from operations was $46 million making it one of the strongest quarters of cash generation the company has seen in many years. As a final summary point you will hear a positive outlook as we are reiterating our targets for 2020 provided during our Investor Day in September with our confidence only increasing given the positive data…

Thank you. [Operator Instructions] Our first question is from the line of Craig Ellis with B.Riley, FBR. Please go ahead.

Thanks for taking the question and congratulations on the strong performance in the business guys. Steve, I'll just start with the follow-up to some of your prepared remarks. So it seems like there are some very encouraging things that are happening in sample management. You outlined at analysts day a number of things that you saw in the business that you wanted to improve and it sounds like you're making progress there. The question is relative to where you'd like that business to be operating when it's firing on all cylinders if you will where are we now and what's left to do to get the business to where you'd like it to be?

Yes. Thanks Craig. I think your observations are right. We feel good about the business. We're going to need a couple of quarters’ approved points for you but generally the go-to-market approach is good. We're streamlining some activities inside and we feel confident that as we come out of 2020 that we'll be back in double-digit growth rates. So our assessment is that the opportunity is absolutely still there. The customer demand is there and from the standpoint of the engagement of the team and engagement of the customers, things are generally positive. I mentioned that the revenue in the current quarter December quarter will be flat to maybe slightly down. We just, we want to build a little more confidence in as we're building backlog would build more confidence in that we can deliver the revenue but it feels like a positive term for us.

That's really helpful then the next question I had is related to semi. So some of your commentary on semi in the fact that the visibility now shows just one quarter of downward would explain why David was smiling at analysts day but as you look at the business one can you frame for us, one how comfortable you are with just that the near-term production capacity and the CCS business given the strength that you're seeing with the orders? Do you have enough capacity? Do you need to make any changes and then secondly you noted that advanced packaging would be a little bit more muted near-term maybe flatter, what trajectory do you see coming off of some of these more stable near term trends in that part of the business.

Thanks Craig. First of all I think maybe the business is always strong because David smiles. So I think maybe that's the causal part. A couple things that we got out in front of the contamination control capacity. We started that months ago as we knew that that it was coming I think that we're keeping up pretty well but I can tell you that it's tight but customers if we could build one more unit customers will take one more unit but I think that we have a good understanding of what it looks like for December and March and we spent a lot of time going out to customers and it's probably one of the reasons the orders are strong. We've gone to customers and let them know that capacity was going to be constrained and I think that's where people are trying to get into the queue but by and large the opportunities aren't going by but the factory is really full I can tell you that but it feels like a good balance right now and it's heavily foundry loaded but as I meant and the balance of customers and the breadth of the applications is really good. On the advanced packaging again we've always said that we don't have particularly good visibility there but we know that we continue to get new design in wins and it feels like just a pause right now so dropping down to a 10 million level is the low so we've been in quite some time but likely as China business begins to pick up and some of the manufacturers for the advanced packaging continue to go. We feel confident about the business and I just wish we had more visibility than we do. It feels like it might be a relatively flat December quarter before we see some pick up hopefully in early 2020 but we are really confident about the share positions that we have and the amount of design activity that we have to support the next generation of advanced packaging. I think the team is all over it and customers know that we're in the front position there.

And that's great and then if I could just ask Lindon clarification. Lindon thanks for all the financial color you noted that expenses in the first fiscal quarter would be up as the model embeds more of a full bonus accrual or variable comp impact. The question is are there any other items in expenses that would be either positive or negative sequentially and how should we think about the multi quarter impacts of that line item given that around the corner in the first calendar quarter we would typically have FICA and other things that would come into the model?

Yes. It's a great question. So to fine-tune on that I don't think you're going to see any more than the 2 million pressure. In fact we're working on some of the structure around sample management and our overall corporate on the stranded cost concept that we've talked about since the divestiture was announced. So I would say we're not going to make it all up but think of it as 1 million and 2 million of pressure and the quarter probably quarter to quarter. Implications on the year we're not going to constrain investments in GENEWIZ or in the R&D space to do design wins and we're going to continue to lean things out but I think you should take the Q1 and probably extrapolate off of that and I'll just highlight to you that gives us pretty close to the model that we described previously. We afford all that, we afford that Q1 result extrapolated for the year in the model that we described and as we tweak it going forward and as margins evolve we're going to manage this or manage to optimize growth but very focused on operating markup. So yes.

Very helpful. Thanks guys.

Great.

Our next question is from the line of Paul Knight with Janney. Please go ahead.

Hi Steve. Congrats on the quarter. Can you talk about well how much of life science would you attribute to the cell and gene market right now if you can? And what steps you have taken on the large stores business? Is it or you half done there to get profitability up?

So Paul I probably owe you an answer a little bit later on the fraction that's cell and gene but out of a $94 million I think we could probably attributed $5 million to that just to give you a rough idea. However, the investments we're making as you're aware in the B3 Cryo in the cryopod in the transport and handling is pretty significant. We store in Indianapolis and bio storage now a considerable amount of customer cell lines and cells in Indianapolis and the offerings that we have in GENEWIZ are now getting more redirected around some of the applications that support cell and gene. So I think it's a really good question for us to give you a little bit better answer but right now it's certainly in the 5% range and will be a little more crystal about that as we go forward.

And then on the stores business –

On the large automated stores they were making good progress. I think there's a lot of focus on that over the past quarters anyway but the activity related to the installations, the activity related on the purchasing and on the manufacturing side I think are getting streamlined and when you start to see gross margin improvements a lot of that is coming from the activities in stores. We're 25% if I had to guess we are 25% of the way that we're going to be and as we exit 2020 there will be a lot more fit business but that team is really focused around the kinds of things that improve the efficiency that bring the cost down and specifically getting the performance of the tools out of the chute in the install phase and I think there's a lot of good activity there. So I'd say we're 25% accomplished but 75% energized around it.

And then lastly Steve it seems like GENEWIZ with that 29% year-over-year pro-forma was, I think that's the best number I've heard coming out of GENEWIZ. Is it you've added square footage on the lab space? What would you attribute that level of growth to?

Hey Paul, every day we're impressed more and more by the service level capability of the GENEWIZ team. These are incredibly strong scientists solving important problems for customers and every time they solve one customer brings them another one and in what we find is we talked about adding 270 new customers just in North America and Europe, the customer capture speaks for the capabilities of this team and like Lyndon said we're not going to constrain them. We're going to just keep adding capacity capability because they seem to be able to bring it in and deliver. So we're really pleased by the performance. We don't know how long we will sustain it but it's as good a team as the numbers show.

Well, I will add a little color to that too just operationally this is a space where we have the conversation pretty regularly is what is the capacity requirements for the next quarter. And are we making, do we see any pinch points and so this is a focus that we never turn away a customer in that sequencing space because we know once we turn somebody wait you've got to invite them back pretty wholeheartedly. So we'd like to keep them. So we watch the capacity pretty carefully.

Thanks.

Our next question is from the line Patrick Ho with Stifel. Please go ahead.

Thank you very much. Steve maybe first off on the life sciences, you mentioned the go-to-market strategy seeing some tangible effect particularly on consumables and service side of things. Is that strategy having an impact across the board and that would is giving you more confidence that 2020 is heading for a potential growth year?

Yes Patrick, I think it's a combination of everything. I think the offerings are really strong and when we were at the investor and analysts say we talk specifically about how do we have the people who are out capturing business doing more of that and how do we support them internally so that they don't spend so much time inside the company but rather out with customers and that we can support the things that they bring in with the internal capability. I think that's been the first part of it the salespeople go South. And I think that's been had the biggest impact and I think we streamline the offerings to make sure that we're going after business that we really ought to be capturing and we have more work to do. That's not something we turn particularly quickly but the team has really engaged the go-to-market activities that we have we think are solid and we do have more sales people to add to the company and with active right now we've made some progress and we're going to keep bringing some people who can help us to add more to the backlog and then ultimately get product shipped to customers.

Right. That's helpful and my follow-up on the semiconductor side of thing here you mentioned that you're starting to see recovery on the top tier of vacuum robots business which is not a major surprise given some of the turns that we're starting to see in the wafer fab equipment spending market. Given that we're starting to also see some new tools both on the [action] deposition side I guess hit high-volume at these leading-edge nodes. Can you characterize, how you're seeing design is that you may have had over the past year or two now starting to hit high-volume with your top tier customers?

Yes. I think the answer is in the question there Patrick. So, I think without question we've been able to gain share. Some of the technologies that we brought in the latest generation of robots really relate to much higher temperature, much more severe contamination that's in a tool and in particular the very precise placement of the wafers and those are wins that we've been accumulating over the past couple of years and indeed we're beginning to see those tools shift. So the share gains that Dave talked about are beginning to show up and we anticipate that as those new tools begin to hit the market here in 2020 that we will be to report increased share gains and better profitability out of the vacuum robot business.

Great. Thank you very much.

Thanks Patrick.

[Operator Instructions] Our next question is from the line of Jacob Johnson with Stephens. Please go ahead.

Hey thanks. Steve maybe following up on your sales people commentary just now these new sales people you're adding in sample management is this working to sell more into existing customers or is this more about adding new customers in terms of those initiatives?

Yes. Jacob I think the thing that we want to focus on a particular is we mentioned that we've got some large accounts that we can expand to have other accounts of like characteristics also to be large accounts for us. So it's mostly for new and deeper penetrations at customers where we have to have a greater presence. So the teams that are covering accounts currently are doing an exceptional job and they'll continue to win more business from those accounts but we're really after how do we continue to approach customers who are not currently customers in the same way that some of the large accounts are.

Got it and then obviously really nice organic growth on the sample management business this quarter but I would be interested if you could kind of tease out how that flow down to sample management margins in the quarter?

Jacob could you tie that question back together for me again?

Yes. I guess my questions is you saw nice margin expansion life sciences in the quarter. I think GENEWIZ was a help and I think sample management margins probably also expanded but to the extent you would want to quantify that and just interested to kind of understand how sample management margins performed on a year-over-year basis?

Yes. So actually it's a good question because we didn't have simple GENEWIZ a year ago so in the quarter we're up almost 600 basis points, 580 basis points year-over-year in the segment and our op income this quarter at 7.2% it's really similar operating income margins between the two businesses this quarter. So fluctuation in GENEWIZ is still taking place one quarter to the next but they happen to be pretty similar this quarter. We're encouraged exactly on the point that the strength in sample management and we're equally encouraged by the amount of profit the GENEWIZ has brought into the companies. One thing to note that just year-over-year if you look at the operating income of the company it was up a total about 26 million, 17 million of that on the year-to-year difference came from Life Sciences addition of GENEWIZ but also significant improvement in sample management. So it's a diversification going to finishing the year 47% of our revenue in life sciences. I know early in our life cycle of this transformation people question was is this going to have the impact, when will it have the impact? Well, I think we're seeing the impact now. So I think your margin question is absolutely right. I'll highlight the sample management still has more leverage to be had as we grow it we don't see the need as much for the operating expense structure to expand on GENEWIZ where we have higher gross margins. We'll continue to fuel that with SG&A and you'll continue to see leverage out of that but it's at a top-line growth and higher gross margins.

I appreciate that Lindon and mabye last question and give you a chance to answer Paul's question if you have the answer but just on cell and gene therapy obviously a lot going on there. I just be interested what areas of your life sciences segment where you're seeing sort of the most strength from these customers?

So right now the one we can quantify is that on the bio storage, so on the cryo stores and in bio storage. So we're beginning to handle the more cells and what we find is that the cell and gene therapy research institutions understand that handling the samples is really critical and again we need a breakdown for the gene which side of the business it's not as obvious or as clear but we'll work on that for sure. But what we're seeing is in the development in the handling and the storage of retains on the cell therapy side we think along the manufacturing chain and ultimately on the dosing side there's going to be an opportunity for a significant expansion in the automated stores.

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

Thanks Jacob.

And there are no further questions on the phone lines at this time.

So Chris with that I just like to express my thanks to you but the audience here that gives us their attention, their research hours as well as the investments and competence in Brooks. We can be more pleased the way we wrapped up the fiscal year. We're excited obviously two weeks before we finish this. We outlined the investor day so it shouldn't be any surprise that there were no surprises to us as we wrapped up as well as that we're on track in this first quarter. We feel it like we're in a really good spot and we just so appreciate the time and confidence that you all give us. We wish you all best as you head toward a holiday season. We look forward to talking to you in the January time frame. Thank you very much.

That does conclude the conference call for today. we thank you for your participation and ask that you please disconnect your lines.