Greetings and welcome to the Brooks Automation Q4 2020 Financial Results. [Operator Instructions] As a reminder, this conference is being recorded, Tuesday, November 10, 2020. I would now like to turn the conference over to Mark Namaroff, Director of Investor Relations. Please go ahead.

Thank you and good afternoon everyone on the line today. We’d like to welcome you to our earnings conference call for the fourth quarter and year ending of fiscal 2020. Our fourth quarter 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, in addition to the supplementary PowerPoint slides that will be used during the prepared remarks today. Before we start, I would 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-K and our quarterly reports on Form 10-Q. We make no obligation to update these statements should future financial results or events occur that differ from our forward-looking statements presented today. We also may refer 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 to view 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 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 like to open up the call with remarks from Steve on the highlights of the fourth quarter and the full-year. And then Lindon will provide a more detailed look into our financial results and our outlook for the first fiscal quarter of 2021. We will then have time to take your questions after the prepared remarks. And with that, I like to turn the call over to our CEO, Steve Schwartz.

Thank you, Mark and good afternoon everyone. It's a pleasure to be able to report to you today on results from another record quarter and a record year for Brooks. In what remains an uncertain global economic environment, we continue to capitalize on the sustained and accelerating demand for our capabilities. We're a key contributor to what's powering the Life Sciences discovery market, as well as a critical provider of technologies for the Semiconductor industry that keep businesses and institutions functioning in this remote and interconnected work environment. Our unique positions in these important technology markets is what keeps customers at our doorstep. We're proud of our essential contributions and humbled by the requests made of us by some of the world's most necessary companies. And it's what keeps all of us energized as we look to the days ahead. Q4 was an outstanding quarter for the company. Semiconductor with the third consecutive record quarter continued on its torrid expansion path, the result of years of R&D investment that's led us to design wins and share gains to satisfy the demands of a market that's been propelled by insatiable data rich applications. The Life Sciences market, which is also providing rapid expansion opportunities, has reaccelerated after pandemic-related perturbations that dramatically slowed demand from academic and research laboratories. And at present, we're right back on the trajectory we were aiming toward prior to the pandemic. All-in, we're exercising our business model and capitalizing on our two businesses, which are leaders in their respective markets. We're investing in new technologies and adding capacity not only to win, but to sustain share gains to ensure that we meet the demands of our robust market. We believe demand for our leading technologies and high quality offerings will remain strong for many years to come.…

Thanks, Steve. I call your attention over to the slides on our website. And I’ll begin with the summary highlights on Slide 3. Q4 indeed was a strong finish for the year. Revenue grew 24% year-over-year, fueled by the strong performance in Life Sciences up 15% and an acceleration in Semiconductor Solutions to 31% growth year-over-year. As we dig in, you will see that the doubling of our non-GAAP EPS has no unusual anomalies in the prior or current periods as they say we earned it the old fashioned way, just pure operating margin expansion. On a full-year basis, 2020 revenue was 15% higher than 2019 at $897 million, again supported by double-digit growth in both businesses of Semiconductor and Life Sciences. It was comparable between the two businesses with Life Sciences growing 16% and Semiconductor 14%. Despite the turmoil in the environment through the year, the non-GAAP earnings per share for the year landed rather precisely in a range we described a year earlier and $1.26 or an increase of 65% over 2019. As you might expect, with the acceleration of earnings comes cash flow. Operating cash flow of 52 million for the fourth quarter is a record quarter for the company. We ended the year with 306 million of total cash, equivalents, and marketable securities on the balance sheet. We are in a net cash position of $255 million. Those of you that have been with us know we continuously track ourselves to a three-year model, where our most recent model was defined in our September 2019 Investor Day event. I am pleased to confirm that in our estimation, we have achieved the results thus far to put [it solidly] on track for the 2022 target revenue of $1.1 billion to $1.2 billion and non-GAAP earnings per share…

Thank you. [Operator Instructions] Our first question is from the line of Steve Unger with Needham. Please go ahead. Your line is open.

Great, thanks. Congrats on really a truly exceptional quarter, particularly in Life Sciences. The gross margin, am I seeing that correctly, that’s 50%, and I really didn't think you would get there this soon. I'm going to ask you, is there still wood to chop there in 2021? And what should we think about as far as reinvestment, now that the margin is, you know, 50% or higher? Are you expecting now to dive into more expansion of your commercial teams or research and development?

You know, Steve, it's a really good question, and it’s a multi-layered equation behind gross margin. Of course, in the early part of the year, the products’ business kept taking up cost quite a bit, and we gained a lot of traction on cost takeout. But throughout the year, we also captured a lot of value in our offerings with our customers, meaning in some cases on products we stopped discounting some and held our price and value, but in other cases we provided more sophisticated higher value offerings in total. So, we've described the hub strategies, we've described the special care in the custom offerings, Sample Management, and of course in the GENEWIZ space, we described to you the proprietary capabilities that we developed in the ITR space. So, all of these do translate not just to higher demand, but also higher value margins. So, when we see these things happen, it's energizing to us and yes, it does keep our team thinking and developing new ideas, new innovations. We have maintained our operating expense investments behind our R&D line in the – particularly in GENEWIZ and in our services based around the integration and the value that we can provide as a total offering there. And I think most notably, I think we’ve captured the attention of the spaces around cell and gene therapy and that's got value wrapped around it. So, I think all of these contribute. I think when you say is there more wood to chop, I just want to make sure it's not misconstrued. I think we'll continue to always as a company have the inherent habits of taking out cost, but at this point it's more about the growth of the value offerings, more about developing those proprietary edges, and demonstrating the value in the marketplace.

Great. And then my second question is in Life Sciences and the BioStorage area, are you still carrying a backlog of projects to implement, and with the recent resurgence we're seeing in COVID are you expecting to hold? Are you getting access to implement those systems? And then what is your outlook for BioStorage? I know we're going to start distributing vaccine products. Is there opportunity there for Brooks to be a part of that on the distribution or administration side?

So, my instincts are that, I think you’ve read it correctly, but let me just correct some of the labeling a little bit, so it doesn't confuse people. So, first you're asking about store systems and our ability to install systems and we – that's clearly in our product set and we are carrying some backlog as we go into 2021 that would have definitively been installed and in place or further in progress as without the COVID environment. As Steve noted in his remarks, we signed up new systems and we got systems in progress already and we closed some systems. So, we've been able to close some but not everything and it has slowed us down. So, that's been a headwind for the year and on the flipside, on the product side, C&I has been a nice tailwind and in our assessment, the capture of the customer names there may be a sustaining factor force. COVID is bringing demand, but we think that the relationship expansion is substantive for us for the long-term. Now, if I move over to the storage services or the Sample Repository Solutions, of course we carry some backlog there. What we believe is there is less of a backlog, but customers overall have been reluctant to move let's say archiving and general hygiene things that will continue to pick up over the year, I think in 2021. But we wouldn't call it out as a material swing, what we would say is the engagements that we're driving are still substantial and they carry a lot of upswing on the hub strategies on the vaccine management, but…

So Steve, I'll add on a little bit to that. So, in the – we think that there is a critical place for us in the distribution of vaccines. Right now we do store it for pharmaceutical companies manufactured product and the field finished product that ultimately gets distributed. Our play in the logistics sample will be to hand it to the companies who do that distribution. So, we play a critical link in the middle of the chain and that's a really comfortable place and we think we have tremendous value there because of the precise temperature control, the volumes that we can handle, but ultimately the jets and trucks and the places – the companies that ultimately distribute it to clinics or hospitals will be through parts of the supply chain that already exists.

Yeah, I got it. Okay. That's excellent and then one last one on Semiconductor. Is there any way you can characterize the impact of the export controls on the SMIC? I'm not asking for specific details and things like that, but just perhaps a broad characterization of that impact was for you and what you see it to be?

Yeah, so, Steve. So, right now the impact is that we are cautiously paying close attention to it. The environment that we're in now where licenses are required is an environment that we had years ago. So, it's not new to the Semiconductor equipment industry, but it's something that hasn’t yet had an impact, but how we set the potential that the manufacturer of those Semiconductors will go to another company and then we serve those other companies, but something that we pay attention to but without impact today and it's an environment that we're familiar – all of us are familiar with.

Got it, great. Congratulations, thanks.

Thanks, Steve.

Thanks, Steve.

Thank you. Our next question is from the line of Patrick Ho with Stifel. Please go ahead. Your line is now open.

Thank you very much and congrats on a nice quarter. Steve may be just a follow up on the question regarding China. I'll ask you a little bit differently. Given your growing presence in the region, particularly with the local equipment vendors in China, do you see any changes in their core buying patterns or their behavior? And what I'm kind of getting at is given their localization efforts overall across the Semiconductor food chain, have you seen any changes in terms of – I guess them trying to find local vendors on the Automation side or are your products that differentiated enough where it's going to be difficult for them to make that type of a switch?

Yeah, Patrick we always care about that, but one of the things that we're pretty confident about is the uniqueness of our products. I think almost everybody in the Semiconductor robot business has tried to replicate what we've done. This been going on for 20-plus years and so we think the capabilities we have are really unique. We also do have – we think enough capability in China that might set our products up uniquely to be able to serve China from China. So these are the things that we're exploring from a number of different angles, the connections that we have with customers and the equipment makers in China and Korea they understand that uniquely we provide automation that's going to be accepted by the Semiconductor fabs immediately because it's a brand and a technology that the IC makers trust. And so, I think there'll be a lot of pressure from all sides from the end customers from the equipment makers and certainly from us that we would be able to continue to supply. So, we're really close to it. Our connections with the customers are extremely strong and we spent, there is not a day that goes by when people from our company aren't in contact with the equipment makers in Asia, but we will always watch to see, but we don't think it's easily replicable just to copy the technology. It goes a lot beyond just the hardware and the physical device. It's the experience we have in 800 degrees corrosive environment that controls technology. We have we think a really unique scope. Hope it gives you the answer?

Yeah, it does give the color I’m looking for. The China situation, I think is evolving as we speak so you gave great color there. In terms of my follow-up question on the Life Sciences end, you had a very strong quarter on the services end. It was a mix of both your BioStorage, as well as the GENEWIZ business. Given some of the COVID opportunities are ahead that you mentioned in terms of the logistics, the transport, and the cold stores, how do you see that potentially being a potential benefit, or a driver for synergies on your product then? Are there opportunities for automated storage systems that you can quote, sell to some of the middlemen that you mentioned?

We think they likely are Patrick, we'll have to see. It's going to come back in – we're talking about billions of samples to start, and so, likely as soon as products are manufactured, they'll ultimately be distributed, and given to patients. So, short of that people will be looking for extremely large volumes. It won't be individual freezers, and necessarily stores. It might be entire rooms, but we do think that in time there maybe applications for that, but right now in the billions of samples level, I think large pharmaceutical companies are managing that by different means.

Great. Thank you very much.

Thanks Patrick.

Thank you. Our next question is from the line of Craig Ellis with B. Riley. Please go ahead. Your line is open.

Hey guys, this is Carlin on for Craig. Congrats on the nice quarter. I guess I want to start with the revenue upside in the quarter. I'm wondering as you looked at the various businesses, what specifically surprised the upside, and what degree of the upside was maybe catch up versus new inflection growth given kind of some of the COVID related slowdowns we saw earlier in the year?

If you went back to our guidance, you would say well your Semiconductor business was kind of solidly in. It's the higher end of the range, but it was in the range, and it was the Life Science business that was over the top of the high-end of our range. And behind that what we did expect GENEWIZ to come back. What we didn't know one was just how solid the NGS and the synthesis business would continue to perform. Sanger came back somewhat on our projections. We saw a modest ramp starting as we referenced three months ago, and we kind of expected it was about to cross over to a pre-COVID level. It's still not gone up to the growth potential it has and had performed that. So we would say it's a touch lower than, had COVID never happened, but it's from the back to end, but really what drove that was the NGS, and the Synthesis services spring stream back. In addition to that, as we highlighted in the products business, the consumables, and instruments came in a bit stronger than what we expected, and I would highlight that we had put some additional capital in behind that, not significant for anybody to think about a sinking capital dollars, but it was additional capital, and tooling to facilitate additional demand in that space, and so we've got that well oiled for additional growth. And we're looking forward for this to continue, but those are the primary areas that generated the upsides that we didn't forecast.

Got it. That's really helpful. And then as I look at gross margin, I just want to follow up on an earlier question. Obviously super strong gross margin in the quarter, even better gross margin in the outlook. I guess as we think about gross margin sustainability moving forward kind of beyond fiscal first quarter, is it fair to say that we've established a new, I guess maybe a new floor, and everything will be moving off of this, or how do we think about gross margin sustainability moving forward?

Well let me address both sides; first Semi and then Life Sciences. And in Semiconductor, I think we've demonstrated this level of gross margin in the past, and went back. So, we think this is pretty typical of our capability, and we think it continues to advance as more, and more people adopt our lead technologies, and more, and more designs, and we demonstrated, and highlighted I guess a lot of design wins, which will be just that, and that will produce gross margin as we progress forward. On the Life Sciences side, I think your characterization is a fair one that there is a new benchmark here for a floor. As I highlighted it's only modestly raised, and it was raised, and modestly raised in proportion from the remix excluding net Alliance revenue, but now we're here with this new mix, and the new performance level. I've always highlighted that GENEWIZ has more of a variations in margins. In the past it was about five point variations, and they’re at the higher end of what I call it now, and so there could be a mixed impact in future quarters, but if it's 48% to 52% range, I would say that's what to expect. 50% I don't think is going to be a surprise if we continue that, but certainly wouldn't want investors to be disappointed of the drop back to 48, and bounce back, and forth in that range. We'll continue to drive forward, and we think we've got a business that will continue to generate value over the next couple of years to sustain something about 50% in the longer-term.

Got it, all right. Thanks guys and congrats on a nice quarter again.

Thanks Carl.

Thanks.

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

Hey thanks guys, and I'll add my congrats on a nice quarter. Maybe a bigger picture question for Steve, balance sheet is in a really good place, operation seems to be humming along, so would be curious on latest thoughts on M&A, and maybe broader thoughts on capital allocation?

Yeah so I'll add your list there. We have an appetite in there, opportunities for us, so we're pretty active in pursuit, but these things take time, and we're going to make sure that we do something that fits the company, but we have a strong interest, and continue to expand the capability. I remind you as you're well aware the fact that we have GENEWIZ now really expands the view that we have in terms of what fits particularly well. And there was a question earlier. We have really an exceptional sales organization on to which we can put a lot more products, and services, and they're extremely capable. It's one of the reason we're capturing synergies, so we're eager to look at what else we can add to the company, and take advantage of a lot of infrastructure capabilities that will make it successful here.

Got it. Thanks for that. And then maybe just a quick kind of modeling question for Lindon. Lindon just on the RUCDR relationship, it sounds like it was kind of doing $5 million a quarter. As we think about the next few quarters, should we expect this to be a headwind through the first three quarters of FY21, and then obviously then lap it in the fourth quarter next year. Is that kind of the math?

So a headwind and a year-over-year growth rate, yes, but on a sequential basis, it will have about a 1% or 2% headwind in this first quarter, and this can be really nominal. We'll continue to provide a little bit of services, but on the recovery basis. It's not in the same definition of what we do and it will round to zero on a new line. So, I call it a headwind, but we only have a couple of million of revenue in this quarter, as we did that unwinding.

Got it. Thanks for taking the questions.

Yep. Thank you.

Thank you. Our next question is from the line of Paul Knight with KeyBanc. Please go ahead. Your line is open.

Hey guys. Could you talk to the capital equipment instruments side of the Life Science business? What was your growth rate there? And then as a follow on, the vial storage growth rate of 18%, what do you think normalized growth rate is of that market?

So Paul while Lindon is looking up the instrument part, let me just take a crack at the BioStorage portion. We did some modeling. We brought some outside help. I think if you recall, we estimate that the opportunity grows there above 10% per year, so estimates range between 8% to 12%, but I think we zeroed in on something we think, that's about a 10% opportunity growth in terms of samples to be stored.

And when you think about the [BioStores] businesses do think that you can – you need to expand this to more sites per customer demand and you would – can you do that Greenfield versus paying what I think deals demand right now, how do you envision you expanding BioStores?

So, we have a lot of flexibility Paul and so we have a pretty good geographic footprint right now. What we find is that some customers still aren't ready to have the samples off site, but we do a lot of on site management actually. So, we almost set up the capabilities that we have in one of our bio repository inside a customer site and we manage it as if. So, we're very flexible here in terms of how we add value. We're certainly open to additional bio repositories, but we find that once the customer becomes comfortable with the service that we provide management to their samples whether it's in the building next door or in the building a thousand miles away, our ability to manage it and retrieve the samples from the customer put them into our protection and to get the satisfaction of the customer in 24 hours is something customers grow into and it becomes less of an issue once they have the experience. So, we still see a broad range and we offer a broad range of capabilities for customers.

Okay, thanks.

And Paul, this year I'm going to take your question to be everything other than the C&I in the products side of the business, which makes up our storage system our Cryosystems and overall it was down about 8% or 9% for the year offset with that 67% growth in the C&I. And this remember this is where we carry little bit of backlog into 2021 on the store systems and we're seeing nice momentum on the engagement and continued growth in the Cryo space, the automated Cryo system.

Okay, thanks.

Yep.

Thank you. Our next question is from the line of John Pitzer with Credit Suisse. Please go ahead. Your line is open.

Yeah. Good afternoon guys. Thanks for letting me ask the questions. Congratulations on the solid results. Steve you talked about on the semi side of the business still expectations for growth next year at the industry level for WFE. I'm just kind of curious do you think that your record of outgrowing the market stays on track next year? Will next year be a similar rate about growth that you have seen over the last three and if so what do you see driving that?

So, John it will be tough for me to be any more accurate than anybody else on the magnitude of the opportunity, couple of things though. We delivered $158 million in Contamination Control. When we got into that business six years ago the trailing 12 months revenue was about $30 million. So this is a secular growth driver the fact that Contamination Control continues to explode because it's the necessary capability that was not necessary even 10 years ago. So we think that's a considerable driver. If we anticipate that there will be an expansion in Memory, the Deposition and Etch characteristics there will continue to propel the vacuum automation. So, we remain confident just because of the product portfolio that we have to serve the advance semi market and all of the products that we sell for the most part they're all capacity expansions. We believe that the amount of the vacuum automation and the amount of contamination control will be a higher fraction of the WFE and the high market share positions that we have means that we'll capture that and we'll be at a higher growth rate in WFE. So, I wish I could tell you other than the forecast that we get both from the customers and from people like you who forecast the anticipated growth in the market that we feel good about going into 2021 and we're certainly more confident about our position to outperform.

And then Steve as my follow up on Life Science understanding that the situation is very fluid, but to the extent that you are optimistic that a COVID vaccine could represent an incremental revenue opportunity for you guys next year is there any way to seize the opportunity? When will you have more confidence to be able to be kind of be more confident in that opportunity and is it really a function of Pfizer-type vaccine that needs cold storage or would you see any vaccine of COVID providing incremental market opportunity for you?

Yeah, John it's a really good question because we do spend a lot of time on that. We want to make sure that we're not building capacity for one-timer and there are other vaccine – there are other pieces of vaccine business that we have that are not COVID related and so we’ve begun to establish growth vector if you will in the support of that particular area and we happen to be able to apply that also to some of these COVID-19 opportunity so when we talk about what we think is already in our backlog that will give us approximately a $10 million opportunity that's for vaccines generally some of that is COVID for 2021 and we do treat it as [additive]. We're already full speed ahead on the course that we have related to the Sample Management and the other bio repository business we have all of the lab services we provide we do treat the COVID opportunities as additive and we want to make sure that we haven't defocused from the biological sample business that really is the heart of all that we do.

And Steve just for my own education on the vaccine distribution is the key characteristic cold storage or does it not matter?

It's cold storage and it matters a lot, so we also have transport capability, so we can – for example, in the catalyst example they have us both transporting and storage and then re-transporting when they ultimately want to send that on to the people who will do the final distribution of their product, so we perform those function in that cold chain at pretty significant volumes.

Perfect, thank you.

Thanks John.

Thank you. And there are no further questions at this moment. I will turn it back over to you if you have any closing remarks.

[Indiscernible], thank you very much. Everyone, we so appreciate your attention and these are really tumultuous times for everyone and the fact that we’ve got two essential businesses that keep demanding our offerings, our attention. It really energizes us as a team. Safety is always our first priority for our employees and for our customers in fact as we operate on their premises and we'll always rank that number one, but it's full steam ahead for us, and we feel like we have the momentum behind us out of this last year, the demand. We're making the investments to step-up to this environment and we're quite proud of our teammates and at the same time we're looking forward to these new opportunities to step-up and be part of the solution. So, with that, we look forward to talking to you next quarter and welcome to our 2021 fiscal year. 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.