Greetings and welcome to the Brooks Automation Q3 2020 Financial Results. [Operator Instructions] As a reminder, this conference is being recorded, Thursday, July 30, 2020. I would now like to turn the conference over to Mark Namaroff. Please go ahead.

Thank you. Thank you, Malika and good afternoon, everyone on the line today. We’d like to welcome you to our earnings conference call for the third quarter of fiscal 2020. Our Q3 earnings press release was issued after the close of the market today, and is available on our Investor Relations website located at brooks.investorroom.com, as our supplementary PowerPoint size that will be used during the prepared remarks today. Before we start, I’d just 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 Litigations and Securities Act of 1995. There are many factors that may cause actual financial results and 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 on our aforementioned PowerPoint presentation on our website and our various filings with the SEC, including our annual reports on Form 10-Q. We make no obligation to update these statements and should future financial data or events occur that differ from these forward-looking statements presented today. We may refer to a number of non-GAAP financial measures also during the call today, 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 a 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 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 some remarks from Steve on the highlights of the quarter. And then Lindon will provide a more detailed look into our financial results for the quarter and our outlook for the fourth quarter. And then we’ll have some time to take your questions after the prepared remarks. So with that in mind, I’d like to turn the call over to our CEO, Steve Schwartz.

Thank you, Mark and good afternoon everyone. We are pleased to have you with us today as we report results of a strong third quarter. In spite of COVID headwinds and uncertainties, we delivered a solid top line, increased profitability and strengthened our market position in each segment, and we forecast strong growth again next quarter, further demonstrating the value of our unique product and services portfolio and our positions in 2 robust markets. Revenue of $220 million was flat sequentially with Q2 and up 8% year-over-year. Earnings per share of $0.32, was up 26% sequentially, reflecting our improvements in margins and overall resiliency in a tough environment. And different from our earnings call just 3 months ago when the business outlook was particularly uncertain, we believe that we found our footing in this current stage of the COVID-19 environment, and that gives us more confidence about our near-term guidance. When we last spoke with you, we were in the peculiar life sciences environment where academic demand had cratered, but industrial demand and anything related to COVID-19 work was accelerating. Additionally, at that time, while our semiconductor backlog and demand environment was extremely strong, the pandemic had exposed some cracks in the global supply chain, leaving us with some uncertainty as to our ability to deliver to our customer needs. In retrospect, it was a swift action to trigger our business continuity plans that allowed us to overcome this uncertainty and keep all of our 20 plus facilities open and productive. As we manage through the quarter, we had started as the temporary working conditions solidified to become our new normal method of work. We settled into those changes with discipline and new found enthusiasm for what’s possible in a more distant work environment, supported by a committed team of…

Thank you, Steve. I would like to refer your attention to the slides on the website starting with Slide 3. Certainly, the stable revenue on a quarter-to-quarter basis stands out against the backdrop of the COVID environment as does the expansion of the earnings profile. We have some really good signals in the business dynamics that I want to summarize here, which I believe you’ll see as we step through the details. First, the near-term stability translates the year-to-year revenue growth of 8%. You will see that our semiconductor business results reflect the demand ramp as expected and supply chain execution better than we could have hoped for when we started the quarter. And the Life Sciences business is seeing areas of exciting growth as well as areas that are still impacted by the COVID operating environment. All in, both areas show stronger at the end of the third quarter than at the start and finished on a higher ramp-up demand as we entered Q4. Next, the earnings expansion on the stable revenue brings some clarity to the potential of the business profitability. Gross margin strength in the semiconductor segment and the Life Sciences Products business provides strong operating margin expansion. And while the Life Sciences Service business has been lower in the COVID environment, it’s easy to see there is further potential in the gross margin expansion when services, strengthens. The non-GAAP earnings per share grew 26% sequentially and is 60% higher than the same quarter last year. Finally, while the business model shows its resiliency, the revenue and income growth is producing incremental cash. We have a strong balance sheet and liquidity to weather storms, but more importantly, to continue to make investments. Let’s move on to Slide 4 and review the details of the overall P&L. From…

Thank you. [Operator Instructions] The first one is from the line of Patrick Ho with Stifel. Please go ahead. Your line is now open.

Hi. Patrick, how are you?

Good. Thank you very much and congrats on the really nice quarter. Maybe first off, in terms of the Semiconductor business, obviously, you are seeing some strength continuing into the September quarter. You have talked about the supply chain issues becoming better as the June quarter progressed. As you look at those two variables, how much do you believe the supply chain constraints that you have seen improvements in are on your end versus your customers getting some alleviations on their manufacturing side of things, which allows you to deliver products at a more quicker pace? Is it more on your end that you have seen the improvement or is it more on the customer end?

Patrick, if I understood the question. I think we know our supply chain the best. So we had some discomfort about the ability to supply. We had some product coming from Malaysia, some coming from India, places that became hotspots in the quarter, but we think we managed it pretty well. We went so far sometimes is to help some of those suppliers secure shipping and transportation to be able to get parts to us, but the thing that we didn’t know was, would that same supply chain back things up in our customers and just have them not need our products. So I think we were fine securing our supply chain and being able to meet the demand, we weren’t sure that the demand would necessarily hold up from the customers, but indeed everything loosened up and we were able to ship everything that the customers wanted from us in the quarter.

No, great. That’s really helpful and that color. On the Life Sciences and I think, we are seeing how diversified the portfolio and services offerings are that’s allowed you to kind of meet expectations or exceed expectations given the various moving pieces. You mentioned you saw some surprises to the upside. Some areas were weaker. How does this play into, I guess, the longer-term strategic vision of your Life Sciences portfolio? Is this diversification of what you were looking for in terms of offsetting potential strength and weaknesses depending on the market environment?

So Patrick, I think, indeed, that’s the case. A couple of things were accelerated here. I will give you an example. When we combine to form the Life Sciences services business unit by putting in the BioStorage capability in with the GENEWIZ team, what we found is an expansion to something that was on the radar for us, but one that simply accelerated because of the COVID environment, and it’s in the name change. We used to be the BioStorage services. Now it’s sample and repository. We took on some vaccine contracts. So we are taking on some manufactured product and some other capabilities to be able to distribute finished product, if you will, as part of the business unit. The contracts that we are forming between the customers who had either genomic services or sample storage, the sales teams are now engaged in one or the other, and then they ask the customer for example, in storage projects, what will you do with those things kind of help you with the measurement, and we are discovering that there are an abundance of opportunities there. So things that we suspected, we are now putting to contract and we are discovering that, indeed, there are a lot of opportunities we can have to simplify the customer supply chain and to provide just a tremendous amount of this combined service, if you will. On the Life Sciences product side, I think the team has a lot of momentum from an operating standpoint, the margin improvements continue, the confidence in the ability to go sell really reliable products is also helping from a market share standpoint. That team has got a lot of momentum.

Great. And final question for me, Lindon, obviously, you have probably gotten some benefits from the OpEx line due to lower travel and other, I guess, expenses that probably aren’t occurring right now. As you get to a more normalized environment, one, where do you see expenses potential to increasing to or are you able the expense in the current levels given the current environment can be applied at a future date?

It’s a really good question, Patrick. And as I mentioned in my remarks, we had some projects pause or so finish, I should say, in the semiconductor space and the R&D and SG&A, you are exactly right, I had some light areas in this environment. We do see a couple of million pressure going forward in the near-term. And we think it should be safe to be in that range, a couple of million higher, but we also don’t expect all the discretionary to come back right away.

Great. Thank you very much and congrats again.

Thanks, Patrick.

Thanks, Patrick.

Thank you. And our next question is from the line of Jacob Johnson with Stephens Inc. Please go ahead. Your line is open.

Hey, thanks and I will echo Patrick’s comments. Congrats on a strong quarter. I guess, first question, can we just get an update on the synergies between the BioStorage business and GENEWIZ now that these businesses are managed under one roof? It sounds like you guys have seen some initial wins, but any other color in kind of realizing the synergies from these two businesses?

Yes. Thanks, Jacob. Lindon and I will share the response. I think we are starting to see top line synergies, but frankly, the business is not performing at a high-speed yet, so we won’t see some of those cost synergies yet, but we are really bullish. The combination of the teams, the fact that the leader of the – sample or proprietary services business came from GENEWIZ. She is one of the GENEWIZ leaders. She knows how to operate inside the environment. So, the connections with sales, the connections with the account teams and customers so far has been outstanding. We are looking to get volume built up in both sides of the business as a result of this combination. And there, we will be able to be a little bit more articulate about what some of the profitability synergies are. But right now, we are starting to see it on the top line. We mentioned three contracts. We called out three contracts that over the next 3 years, each of them exceeds $1 million. So a small start, but all meaningful and really representative of what we think is possible by the combination of these businesses.

Yes. Jacob, I would just add, what we see is mostly in the people in our business, pulling this together and taking the leadership from GENEWIZ, integrating with the leadership from the BioStorage background. We have got people from the science. We have got people from precision medicine backgrounds. We got people from the infrastructure background working together and this – the strategies that we have had around the hub – the sample hub, the strategies we have had around sample processing and the insight that they are all bringing from the customer side of things, the science side of things, has just been really impactful on how we can propose to these customers further than on the cost and synergy there. We are seeing how we can combine and propose cross offerings to customers and then make that a synergistic sale from the same sales team as well as leverage the value statement. And of course, we have got some lab space being developed inside BioStorage, which GENEWIZ will make you of and some lead opportunities going back and forth. So it’s starting to happen. We are not – we have said so far, we wouldn’t surface numbers for a model, but we are certainly seeing it start to happen.

It sounds like you have had some nice wins there. Maybe just one more for me, your Analyst Day last year, you talked about some efforts to expand your penetration into the academic and government markets. With academic labs kind of closed, I guess, they are opening back up or opened back up, is this still a focus or have you reallocated resources to kind of focus on pharma and biotech clients in the current environment?

Jacob, it was still very much a focus. And we look forward to report on some meaningful results as we get into 2021. So it’s still a real area for focus and an area for great traction actually.

Great. Thanks, Steve and Lindon.

You bet.

Thanks, Jacob.

Thank you .And our next question is from the line of John Pitzer with Credit Suisse. Pleases go ahead, your line is open.

Hi. John.

Hey, guys. This – sorry, this is Dalya Hahn. I am here for John right now, but congrats on a great quarter, guys. I just had a question about the semiconductor solutions side of the business. We have heard a lot recently about worries of WFE spending sustaining into the second half. Memory spot pricing was a little bit weak, Intel pushing out CapEx. Just wondering what are some drivers you can kind of point us to how this business has kind of historically outgrown the industry or been relatively insulated, whether that’s on the product side, design wins, kind of the diversified set of your customers. Just kind of would love to hear a little bit more about that going forward?

Dalya, thanks. It’s a really good question. It’s the one that we ask every day, but let me give a little bit of color. So we had really strong foundry drivers. And anything that’s at the leading-edge technology has a high content of vacuum technologies where we have particularly high share, and of course, the Contamination Control is essential and pervasive. So that’s been a driver to date. When we look forward, we would anticipated that at the end of 2020, maybe early 2021, where we might begin to see some additional Tier 1 foundry spending for even 3-nanometer, but we understand that will be pushed a little bit. That said, any activity in China, just to give you some indication, is an outsized driver for us because there are a number of OEMs who are dependent upon our vacuum automation technologies, both at the robot and systems level. And it’s something that we don’t see in a big way, maybe measuring overall WFE, but because we have such high content that it doesn’t take a whole lot of that spending to move the needle for Brooks. And I think you have seen that over the past years as we continued to expand outside of WFE just because of the content we have. Similarly, actually, the region with the largest number of CCS customers for us in the world is China, by a lot. So the number of CCS customers is highest in China, and that’s been really an exceptional region for us. And so when we mentioned 16 design wins for CCS products, you noted a pretty significant win base in China in the quarter.

Great. Thank you very much.

Thanks, Dalya.

[Operator Instructions] Next question is from the line of Joseph Conway with Needham. Please go ahead. Your live is open.

Hi. Joe.

Hi, guys. Thanks for taking the questions. So for the first one, I appreciate the color on GENEWIZ. Nice to see Sanger bouncing back a little bit, but given the slower return of academic research, I guess, first question, do you have a view of the percentage of academic – of the academic customer base that has returned to normal? And then where do you see that by the end of the calendar year? Thanks.

So Joe, we are hopeful that we will be back to 100% of where we were pre-COVID. Right now, here’s the dilemma for us, is we don’t know if some of the things that we received were just pent up, things that people finally got back, and we saw a pretty strong surge, but I will tell you that we have had about 5 consecutive weeks at almost flat levels that are about 90% of the level that we had before. So we are still digesting in the customer base, in particular, but the academic labs are not uniformly back. It’s still pretty regional, but we anticipate that if we get – to be within 10% of where we have been, is already what we think is really strong performance. We are modeling that in our future, but we are hopeful that we will be higher than that by the time we get to year-end, just to give you an example, but that’s how we based our forecast, kind of staying at these levels for now.

Okay, great. Great. And then last question, we have been getting a lot of questions from investors on Intel and their delay of the 7-nanometer chips. So we are just curious, how does that affect your business? And does this have an impact on the outlook for contamination control or design in wins? Thanks.

Yes. And so for us, it’s difficult to say in the near-term, what would happen, but the capacity will go somewhere. And the technologies that are required to manufacture those devices, whether by Intel or by somebody else, we will still – we will go to manufacturing capabilities. So we will catch up to it. We are just not sure in what country and what fab, but we are pretty confident in the technologies that are required in our market share and market position. And so ultimately, we care some, but we don’t have to care necessarily, where it ends up to be secure in our market position about serving.

Okay, great. Great. Thanks for that and congrats on a great quarter to you guys.

Thank you, Joe.

Thank you, Joe.

Thank you. And there are no further questions after this one. Thank you.

Malika, thank you very much for coordinating us and to all the analysts and investors, we really appreciate the attention and the time that you give us. And we will take one last opportunity to just say thank you for the employees of Brooks around the globe that have not just participated, but they remain diligent and dedicated to everything we had to deliver throughout this crisis and it’s still tense and is still stressful. So we appreciate them every day. More importantly, or equally important, I should say, our customers still need us and they are looking for us to do more this next quarter than what we did this last quarter. So we look forward to doing it again and talking to you all again this time next quarter. So thank you very much.

Thank you. Ladies and gentlemen that does conclude today’s call. We thank you for your participation and ask that you please disconnect your lines.