Brooks Automation, Inc.
Q1 2011 Earnings Call Transcript

Published: 4 Feb 2011

[Operator:]

Good morning and welcome to the Brooks Automation Earnings conference call. Please be aware that today’s conference is being recorded. At this time, I would like to turn the call over to your speaker today, Mr. Martin Headley, Chief Financial Officer. Please go ahead, sir.

[Martin Headley:]

Thank you very much, Katina, and good morning everybody. I’d like to welcome each of you to the Brooks Automation Inc. Fiscal 2011 First Quarter Financial Results call. Our press release was issued after the close of markets last night and is available on our website at www.brooks.com as are the illustrative PowerPoint slides to be used during our call today. I’d like to remind everybody that during the course of the call, we’ll be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. There are a number of factors that could cause actual financial results or other events to differ significantly 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 website, and to the Company’s various filings with the SEC. I would also note that we make reference to a number of non-GAAP financial measures which are used in addition to and in conjunction with the results presented in accordance with GAAP, and should not be relied upon to the exclusion of the GAAP measures. Management believes these financial measures provide an additional way of viewing aspects of our operations that, when viewed with our GAAP results and reconciliations to GAAP measures, provide a more complete understanding of our business. Joining me on our call today is our President and Chief Executive Officer, Steve Schwartz. After I have provided an overview of the first quarter fiscal 2011 financials and a summary of our outlook for the March quarter, Steve will discuss our major accomplishments and near-term areas of focus and the way they impact our positive outlook for the future; and we will then take your questions. During my prepared comments, slide references relate to the PowerPoint presentation posted on our website to accompany these remarks. As we reported in our press release issued after the market closed, the net income attributable to Brooks for the first quarter of fiscal 2011 was $23.5 million. While GAAP earnings per diluted share were $0.36, adjusted earnings per diluted share excluding special charges were $0.37. Adjusted earnings were down slightly on a sequential basis at 23.7 million from $24.4 million. In both the first quarter of fiscal 2011 and the fourth quarter of fiscal 2010, the only items excluded from adjusted earnings are modest charges related to our past restructuring programs. As anticipated and indicated by our guidance for the quarter, revenues declined slightly on a sequential basis with reduced demand from a large OEM following their accumulation of significant inventory of certain of our subsystems in fiscal 2010. Excluding the impact of this item, we had modest revenue growth for the quarter. Our revenue growth was driven by demand from our smaller customers, and the percent of our revenues to our largest three customers declined from 46% to 43%. We drove margin expansion, and this resulted in an improvement in operating profits before special charges from $22.6 million in September quarter, the fourth quarter of our fiscal 2010, to 23.9 million in the December quarter, the first quarter of fiscal 2011. The $1.5 million increase in our income tax provision was in line with our expectations, and together with reductions in foreign currency related gains within other income resulted in the $0.7 million sequential decline in net income attributable to Brooks. As Slide 4 shows, the significant driver in sequential performance this quarter was 170 basis point improvement in gross margin, taking gross margins to 32.1%. The gross margin improvements were secured across each of our segments, and I’ll describe these more fully in a short while. We continued with our investment in increasing engineering activities with both the hire of additional engineers and the commencement of a significant engineering outsourcing program. As a result, research and development expenses increased sequentially by $900,000. Operating margins improved by 100 basis points to 13.2%. The OEM inventory-related revenue reduction arose in our extended factory business, and as a result we saw the extended factory proportion of revenues ease slightly to just shy of 32%. The semiconductor components of our business remained at 84%, of which 3% is MEMS. LED revenues improved whilst we encountered a reduction in industrial end market revenues. Slide no. 5 shows how the revenues and operating profits before non-recurring income and special charges bridged from the September quarter to the December quarter. The critical solutions business provided additional operating profit of $600,000 despite a modest reduction in revenues of $600,000, driven by margin improvements and a favorable mix of products. The system solution business reported a flat profits profile on a $3.5 million revenue reduction. This is the segment where we experienced the reduction in extended factory revenues. But as we projected in our last conference call, we had an increase in royalty revenues that offset the profits impact from revenue reductions elsewhere in the segment. Finally, our service business saw a surge of $1.2 million in profits on a $900,000 increase in revenues, with expansion in margin rates and favorable mix. The segment also benefited from a service accounting credit where costs were properly recognized in prior quarters. Slide no. 6 charts the revenue adjusted EBITDA progress over the last seven quarters with a $47 million growth in adjusted EBITDA while revenue expansion has been $135 million. Adjusted EBITDA margins are now 16.8%. From a Reg G perspective, please note that the additional EBITDA reconciliations are provided as a supplement to each of our quarterly earnings releases. Our cash generation was moderated below EBITDA levels by an $11.3 million build of inventories. Also, as shown on Slide 7, capital expenditures for the quarter were $1.6 million. For the quarter, we built our cash position by $15.5 million. Looking at the selection of our balance sheet accounts as set out on Slide no. 8, cash and marketable securities, as just discussed, grew from $142.4 million to $157.9 million. This includes those securities classified as long-term on our balance sheet, which are nevertheless freely marketable and can be considered readily liquid. Our working capital velocity slowed to 17% of annualized quarter sales as a result of the previously referenced inventory build. Accounts receivable were reduced by $4.7 million as a major account became current again. The build in inventories to $127.1 million, while initially unplanned, became evident mid-quarter as necessary to support continuity of supply, particularly in the case of a broad variety of printed circuit components and certain Asian-sourced critical components. This set our inventory turns back to June 2010 levels of 3.8. We have action plans to bring inventory turns back to more appropriate levels and expect to report substantial progress during the March-ending quarter. Accounts payable were again reduced with days payable outstanding at a low point of 45 days. This reflects the mid-quarter inventory build. Accrued compensation reduced from the end of fiscal year incentive compensation payments paid during the December quarter. Slide no. 9 shows that we’ve continued to have a very robust return on invested capital at an annualized rate of 36.7%. This is an important return metric as we manage for robust growth with strong returns. On the next slide, I’ll briefly cover our sequential segment performance. On Slide no. 10, we review the sequential results of our critical solutions segment. The top line was approximately flat with cryopump sales growth offsetting some lumpiness in the demand for our chiller products. The chiller product lines will show robust growth in the March quarter, fueled by the ramp in touchpad capacity. Gross margin expanded again and was 41.7% for the quarter. We increased engineering investments, resulting in a $600,000 increase in segment operating expenses. The reported segment operating income for critical solutions was $13.5 million in the quarter, and the operating margin improved sequentially from 16.5% to 18.1% of revenues. On Slide no. 11, we summarize the performance of the systems solution segment. Revenues declined in the extended factory for the reasons previously noted. The mix impact, however, resulted in further gross margin expansion to 23.9% from 22.9%. This fell through to the segment bottom line, and segment operating margins expanded to 11.4%. The global customer operations results are set out on Slide no. 12, and it shows the impact of double-digit robot service revenue growth and significant margin improvement driven by material efficiencies. The blended sequential growth rate was 5%. The materials efficiency, regional mix, and an accounting credit for service costs all combined to boost gross margins to 32.2%. The segment reported a nice $1.3 million profit for the quarter. Bookings in the September quarter were $184.9 million, a 4.2% sequential increase over the September quarter. I’d like to go back and say those numbers were for the December quarter - $184.9 million, and that was a book-to-bill of 106. Further, we see robust bookings in January and thus at this time project revenues of at least 185 million for the March quarter. Growth end markets will be LED, MEMS, and touchpad applications, while we project a high percentage of revenues will be to our three largest customers. As shown on Slide no. 13, we believe those revenues will translate into diluted adjusted earnings per share of between $0.33 and $0.37. We expect gross margins to be between 31 and 32% as the low extended factory mix components, servicing accounting credit, and overhead absorption into inventory will not provide the slight boost to reported earnings we saw in the December quarter. We will continue to build operating expense with increased research and development expenditures and a higher stock compensation expense related to the annual Directors Equity Award. Again, the net of all this will be a stronger quarter, both in absolute and relative terms, than we’ve previously projected – a much stronger first half performance than we would have envisaged just three months ago. Designing wins, particularly markets adjacent to our traditional semiconductor core, will have an increasing impact in the second half of the year and will help fuel a strong fiscal 2011. And to give you a lot more color on this, I’ll now turn the call over to Steve.

[Stephen Schwartz:]

Thank you, Martin, and hello everyone. Today I’d like to highlight some of the major accomplishments for the quarter, outline our near-term areas of focus, and give some color as to what we see longer term. Our outlook for 2011 is stronger than we thought one quarter ago. You’ve heard already from many of our customers about how they see 2011 shaping up, and we’ll benefit from this improvement in business and outlook. The magnitude of our success, however, will not depend solely on the growth of semiconductor markets and share gains in those markets but also on the returns we’ll generate from the significant investments we’re making in our future. We are focused on three major business thrusts – one, we’re gaining market share in our current businesses; two, we’re expanding the market opportunities for our current products by aggressively providing solutions to applications in the rapidly growing adjacent spaces like MEMS, LED, and OLED, wafer-level packaging and active display, that leverage our product and technical capabilities; and three, we’re developing new technologies that will both serve our current customers and current markets more productively but will also allow us to take those technologies into different vertical markets that are not as closely tied to consumer electronics. Each of these growth paths requires significant engineering and technology resources. We’ve increased our investment in these areas while we focus on achieving market diversity that the commitment to these areas will generate. I first want to highlight the significant progress made in our systems business where we captured four new design wins. Two of these system wins were for semiconductor applications, one was for MEMS, and we added another LED application win. Two of these wins were at the expense of incumbent competitors and two were designs for new products for existing customers. In our critical components business, we’re making great gains, notably in Japan where we have historically faced strong competition both in terms of product capability and price. Specifically, we won market share against Japanese cryopump competition on Japanese and U.S. OEM equipment used in in-plant and deposition applications. In the quarter, we saw very strong demand for our large vacuum chamber pumping solutions that drove record bookings of our Polycold products sold to Japanese OEMs who supply systems for tablet display manufacturing. We saw our next generation of energy-efficient cryopumps system solutions successfully complete the first end user and OEM evaluation tests, satisfying power reduction savings in the fab through the product life cycle. Production systems shipments commenced this quarter and other ongoing evaluations will ensure that the pipeline is growing. Continuing our design wins in Japan, we shipped our first MagnaTran 7 and MagnaTran 8 vacuum robots to Japanese OEMs for new metrology and deposition products. We launched the MagnaTran 8 high capacity vacuum robot to target payloads of up to 6 kilograms to address the needs of emerging TSV, LED, and OLED applications. We also had a new atmospheric robot win for LED with a Taiwanese OEM for a lithography tool application. We continue to make inroads in our large robot business in Korea as we shipped the new Generation 8 robot to a Korean OEM for a tool going to an LCB fab in Taiwan. And finally, we shipped the first of our production version of a cryogenic chiller solution used for cold semiconductor implant processing, and the backlog is building for this application. To summarize, in the quarter we had 12 new designing wins – four for semiconductor and importantly eight for adjacent markets where we continue to engage, adapt, and design products for new applications. Importantly, our penetration into the new adjacent markets requires sales, marketing and engineering engagement far from Chelmsford, and many of the players participating in these adjacent markets are new companies and not necessarily suppliers to the semiconductor market. We are taking full advantage of our global footprint to capture these opportunities. As a matter of fact, three of the new wins we had in the quarter were with first-time customers for Brooks, and to give some idea as to the level of new penetration that’s involved, we are currently engaged in design activity at customers in China, Japan, Taiwan, Korea, and four countries in Europe in addition to our ongoing work with North American OEMs. We will continue to adapt ourselves to be able to aggressively pursue these important markets, wherever they are. It will take a while for some of these new wins to make a significant impact on our P&L, but our forecast is for continued growth every quarter in our adjacent businesses for the foreseeable future. In short, we have a lot of positive momentum and we look forward to more share gain and market expansion in 2011. That concludes our formal comments, and now we’ll be happy to take your questions. Operator?

[Operator:]

Thank you. Ladies and gentlemen, if you wish to ask a question please press star, one on your touchtone telephone. If your question has been answered or you wish to withdraw your question, please press star, two. Please press star, one to begin. Your first question comes from the line of Patrick Ho representing Stifel Nicolaus. Please proceed.

[Patrick Ho:]

Thanks a lot, guys. Steve, can you just give a little bit of color in terms of some of these new adjacent market opportunities? I understand you’re looking to broaden your coverage and expand into these markets, but what will that do to the business model? Is some of the earnings leverage going to be muted in the near term as you go into these new market places?

[Stephen Schwartz:]

Actually I think the products that we’re adapting are right along the margin profile and strong from a pricing standpoint. Patrick, probably the biggest adjustment for us is, for example in a robot application, the way we adapt the products is for payloads that are either much heavier or much smaller than a 300mm wafer, but I think we have good capability and technology to do that; and right now, the products that we’re taking, the business that we’re taking fits the business model really with small adaptations to current product offerings.

[Patrick Ho:]

Okay, that’s great from that front, but I guess I’m looking more—because you did mention, I think, R&D is going up at least in the near term as you add more field engineers, I guess, as the ramp into these new markets go. How much more can we expect in terms of those types of additions impacting the business model?

[Stephen Schwartz:]

Yeah Patrick, probably we’ll go about $1 million more on a quarterly spend rate, and that will take us up to what we told you a couple quarters ago about what we thought the right level would be for R&D.

[Patrick Ho:]

Okay, great. Thank you.

[Operator:]

The next question comes from the line of Edwin Mok representing Needham & Company. Please proceed.

[Edwin Mok:]

Hi, thanks for taking my question and congrats on getting profits on the service business. I was just wondering, how do we kind of think about that business going forward? Are we just going to maintain the service profitability there; and do you guys have a longer term, maybe, operating margin target for the service business?

[Martin Headley:]

I think we have longer term aspirations for this business that are really quite high. We brought in a new executive to run this business. She is very much getting her feet underneath the table and involved with this business, but really the impact of a growth strategy that kick-starts this from our prior pattern is something that you’re unlikely to see before the back end of this fiscal year at the earliest. But we see that as a profitable growth strategy, so we see this as a very important part of our portfolio, an important part of the value-add we bring to our customers and our contact with our end user customers; and so I think you should see this as a business that we will expand both in terms of top line and bottom line with perhaps not much movement in it for the next couple of quarters.

[Edwin Mok:]

Okay, great. That was helpful. And then on your guidance for the March quarter, gross margin is down a little bit, and it’s down a little bit probably because of this R&D investment. But you guide for revenue to increase sequentially. I was just wondering, what are the moving parts for the gross margin that you maybe can help us with the guidance range?

[Martin Headley:]

Right. Well, I think there was a three-principle element that I identified during the course of my prepared comments. First was there will be—we had a particularly low extended factory mix in the December quarter. That will increase consistent with my comments about having an increase in our sales to our largest three customers. Secondly, because we see a reduction in inventory rather than an increase in inventory, that has an impact on overhead absorption, so we will have a less favorable overhead absorption in the March quarter. And thirdly, there was this one exceptional service cost item that we benefited from in the December quarter to the extent of about $300,000 that will not be a continuing item in the March quarter. So those are the principle elements. They’re obviously behind and beneath an awful lot of other dynamics, product line to product line, but those are the three principle matters.

[Edwin Mok:]

Yeah, one question, though – so if I go through the items that you mentioned, a lot of them are kind of one-time events, if you will, or specifically happened in the December quarter. Would that imply the December quarter was a little bit of a frothy growth margin level, and this 31 to 32% is already more a normalized level than you have seen going beyond the March quarter?

[Martin Headley:]

I think the 32.1% was slightly high and abnormal for the level of sales we had in the quarter. Obviously we get better absorption as we move forward. I don’t see the 32% is something that we won’t necessarily print again, but we’re unlikely to print next quarter at around the level of guided sales.

[Edwin Mok:]

Okay, that’s helpful. Martin, just one question on tax rate – how do we think about tax rate for this year?

[Martin Headley:]

You should be thinking about a tax rate of 3 to 4% for the current year.

[Edwin Mok:]

Great. And then one last question – on the new product wins, looks like you guys are gaining some momentum there. If you can help us with two things – one is just between the various markets - LED, MEMS, et cetera – if you can rank which market has the most near-term opportunity for this year, and if you can kind of quantify—I think you guys talked about $40 million potential revenue from those new opportunities. Any way you can kind of update us on that number?

[Stephen Schwartz:]

Sure. So Edwin, the most near-term one is LED and the largest one, followed closely by MEMS. We’re seeing MEMS activity accelerate. Behind that is wafer-level packaging. We see a great opportunity at the wafer-level packaging, but that will probably follow on in the next year or two; but the designing wins right now, we think, are very important. So we’re still anticipating something around $40 million for these incremental businesses for this year, and then we feel like we’re on track; and we do expect considerably more in 2012.

[Edwin Mok:]

Great. That’s all I have. Thank you.

[Operator:]

The next question comes from the line of C.J. Muse representing Barclays Capital. Please proceed.

[Srini Vadlamani:]

Hi, this is Srini calling in for C.J. Muse.

[Stephen Schwartz:]

Hello Srini.

[Srini Vadlamani:]

Hi Martin and Steve. Just wanted to ask you on Steve’s comments yesterday that you guys would be spending—or you guys would be putting your balance sheet to work aggressively. What does that exactly mean, and would it be including any acquisitions and/or buybacks and anything else that could return value to shareholders?

[Stephen Schwartz:]

Hi Srini. We are beyond the stage of studying next opportunities for the Company. We think we have a couple of market opportunities we have identified where we’ll be able to add considerable value, and I think probably the most we can say right now is we’re engaged in some pretty serious discussions with people who are potential partners for us to begin to enter new markets that are around the current technical capabilities we have.

[Srini Vadlamani:]

Okay, thank you. That’s all.

[Operator:]

Your next question comes from the line of Tim Arcuri representing Citi. Please proceed.

[Wenge Yang:]

Hi. This is Wenge Yang for Tim. A couple of questions, first regarding semis. Last quarter when you did the conference call, you mentioned a couple of quarters of flattish shipments, and you see June as the quarter that shipments will pick up; so a lot of things have changed. What is your current view on the semi side in terms of shipments in the next couple of quarters?

[Martin Headley:]

Okay, clearly we see a much brighter and stronger picture for semis than we did three months ago. When we were talking three months ago, though, it was not something that was going to impact the December quarter given lead times, so it didn’t and we performed pretty much exactly where we anticipated guidance-wise. We’re seeing some further strength in the March quarter as is evidenced by our guidance here; but we would see much more strength likely to occur into the June quarter in particular at this stage. We’re seeing a strengthening position; we’re seeing all the signs that it has some degree of strength that is more than just a quarter or two, and should result in a pretty nice near-term picture.

[Wenge Yang:]

Okay. So with your current visibility, is there any sign of what the second half of the year will shape up to be?

[Martin Headley:]

Only that I would say that I’d anticipate we’d see growth again in the June quarter above the March quarter at this stage.

[Wenge Yang:]

Okay. Okay. Regarding the LEDs, you mentioned 20 to 40 million in business opportunities in fiscal 2011. Is this number still hold true considering you are gaining some more market share? Do you see this revenue outlook to be higher?

[Martin Headley:]

No, I’d say it remains balanced because I’d say we’ve an additional designing win and yet perhaps one of our other opportunities is a little moderated from where it was before; so I think what we’ve talked about, which is the LED is the biggest part of this $40 million of adjacent market additional business remains true and it remains within order of magnitude where it was three months ago.

[Wenge Yang:]

Interesting. Some of the—right now the LED market, particularly the MOCVD market, is going through a lot of turmoil with a lot of concerns over China subsidies and other issues. Did you get any indication from your OEM customers with any incremental concern on weakness for calendar year 2011?

[Martin Headley:]

I think we’re very much focused on the next generation tools, and I think for the first tool that comes out – that first next generation tool – the order patterns we’re receiving are consistent with the way they’ve been portrayed by the OEM previously. And so I think they see the new product launch, which might be different than their overall business – I don’t know – as still having the momentum they previously anticipated.

[Wenge Yang:]

Great. One last question – you mentioned about some inventory issues at one of your top customers. Are those issues pretty much gone--?

[Martin Headley:]

Yeah. Our reduced shipments during the course of the December quarter righted that particular issue.

[Wenge Yang:]

Okay. Any update on your lead time? Is that changing or pretty much the same?

[Martin Headley:]

I would say that, if anything, we’ve got some slight reductions in lead times in a couple of our product lines, and our operations management is always being challenged to reduce lead times because we’ve become more nimble, more responsive the further we can reduce those lead times. So we’re always working to do that. I wouldn’t say there’s any meaningful change other than in one particular product line, where we definitely have taken a couple of weeks out recently.

[Wenge Yang:]

Great. Thank you.

[Operator:]

The next question comes from the line of Ben Pang representing Caris & Company. Please proceed.

[Ben Pang:]

Thanks for taking my question. First on the gross margin, if you exclude the one-time $300,000 item that you commented on that would be discontinued after March, is the biggest poggle the percentage of business you’re getting from your three largest customers?

[Martin Headley:]

It would be the extended factory mix is slightly more important than the overhead absorption issue, yes.

[Ben Pang:]

And does that basically just depend on whether these large customers still use the extended factory?

[Martin Headley:]

It depends on the profile of platforms that they have; and don’t forget that our revenue recognition doesn’t marry up with their revenue recognition, so it’s difficult to equate our shipment and revenue levels with the revenue levels that those guys project so there isn’t always a correlation. We have a tendency to be leading edge in the sense that—and they may well then be making adjustments as the integrate, and then for their own delivery and acceptance times.

[Ben Pang:]

Okay. And then for some of the new design wins and new shipments you guys talked about, specifically in Japan, do those type of customers generally go into the extended factory or are they able to go into your more standard product lines?

[Martin Headley:]

No, none of those designing wins impact our extended factory business. Those are all proprietary Brooks products. So at this time, the extended factory is principally focused on a small handful of U.S. OEMs.

[Ben Pang:]

What’s your revenue contribution right now from outside of the U.S.?

[Martin Headley:]

Hmm. Not something I particularly focus on. It would be about 35% currently in terms of where the location of the shipment is going to.

[Ben Pang:]

Okay. And the final question from me – when you talk about your growth opportunities, I think Steve laid them out in order, gaining share being the first one. Is that share gains primarily from the smaller companies, or are you still able to gain share within the larger OEMs?

[Stephen Schwartz:]

Ben, it’s both. We’re making more progress. It takes longer at the larger OEMs, but we’re making gains for sure at the smaller companies, and we continue to make improvements at the larger OEMs.

[Ben Pang:]

Thank you very much.

[Operator:]

The next question comes from the line of David Duley representing Steelhead. Please proceed.

[David Duley:]

Yes, just a couple of housekeeping questions. Did you have any 10% customers during the quarter?

[Martin Headley:]

There were two 10% customers during the course of the quarter, so one of our three largest was less than 10% this quarter.

[David Duley:]

And the top 3 added up to 46%?

[Martin Headley:]

Forty-three percent this quarter.

[David Duley:]

Okay. Thank you for that clarification. Now with the commentary on bookings being strong early in the quarter and also that revenue is going to be up in June, should we assume that you have a positive book-to-bill in the March quarter?

[Martin Headley:]

We would believe that it’s looking at this stage that that would be how the quarter would turn out, yes.

[David Duley:]

Okay. And in the March quarter, could you just describe a little bit—I think what I heard was that as far as the segments of revenue goes, the extended factory is going to bounce back. Is that the majority of the growth sequentially is coming from that segment?

[Martin Headley:]

No. No, it isn’t the majority of the growth. It’s a portion of the growth that then impacts the fact that we’re just shy of 32% extended factory. It will be north of that number, but it doesn’t represent all the growth. In fact, if you kind of align where I said the kinds of bigger opportunities are – LED, MEMS, and touchpad – those are all opportunities that are serviced principally by our critical solutions business rather than by our extended factory business—our system solutions business.

[David Duley:]

Okay. And one final thing from me is it seems we’ve had a lot of positive news about industry CAPEX recently, and I don’t know exactly where the number’s going to come out for 2011; but if the industry CAPEX number, let’s say, is up now 15 to 20%, if it’s going to be in that range, how should Brooks’ semiconductor revenue grow?

[Martin Headley:]

I think we’ve given an idea of the model. Obviously you could see some nice growth. I think if it’s really strong in the back half, that’s taking you north of three-quarters of a billion dollars, to give some kind of sizing to it. We’ve just got to see how that comes through.

[David Duley:]

Okay, thank you.

[Operator:]

Ladies and gentlemen, as a reminder, if you wish to ask a question please press star, one on your touchtone telephone. Your next question comes from the line of Satya Kumar representing Credit Suisse. Please proceed.

[Satya Kumar:]

Yeah, hi. Thanks for taking my question. I think the caller earlier tried to get some color on this, but if I go back three months ago, I think you were already starting to see some strength in the June quarter with shipments looking up, I think, at that point. It looks like things are pretty strong this quarter and we saw some strength, and I was just wondering, directionally do you have any sense at this point in terms of visibility on how shipments might look in the September quarter?

[Martin Headley:]

How shipments might look in the June quarter?

[Satya Kumar:]

No, June it’s pretty clear that you’re still saying looks up, but I think you were saying that sort of a quarter ago. I was just trying to see if you have a sense or any visibility on the September quarter in terms of directionally how shipments might look like?

[Martin Headley:]

I’m sorry –we’ve got a problem at our end. I can’t quite hear you.

[Satya Kumar:]

I apologize. Let me try to speak up a little bit. I think a quarter ago you were saying that you had pretty good visibility into the June quarter with shipments looking up, and it seems like orders are pretty strong so far. I was wondering if you have any visibility at this point on directionally how September shipments might be looking at this point.

[Martin Headley:]

No, we really do not have any visibility into that period. I think the comment three months ago was that we are hearing our OEMs talk about a strong June quarter at that time, not that we had any particular visibility through forecasts or bookings. I think at this stage everyone is kind of scrambling around, trying to digest the news that’s come at the end users, which hasn’t necessarily filtered through to particular OEMs as to who are the winners and who are the losers from those particular overall CAPEX directions that have been provided. So it’s difficult for us to evaluate at this juncture.

[Satya Kumar:]

Okay. You talked a lot about design wins in the business, and in particular I thought you said you had won some cryopump wins with Japanese OEMs for in-plant equipment. I just wanted to make sure I understood that correctly. Also I was wondering if you could add a little more color to that in terms of how you see the opportunity ramping in terms of volume. Is that a small opportunity or do you think that can be reasonable?

[Stephen Schwartz:]

That was an important share gain, if you will. We worked directly with an OEM to prove the capability—or sorry, directly with a fab to prove the capability of the pumps, and it helped us to secure the wins, if you will, at the OEMs. It will be important business. It’s important for market share gain. It won’t make a dramatic impact, but it’s one more win for us at yet another OEM.

[Satya Kumar:]

That’s very helpful. Thank you.

[Operator:]

With no further questions at this time, I would now like to turn the call back to Mr. Steven Schwartz for closing remarks.

[Stephen Schwartz:]

Everyone, we thank you for your time and interest in Brooks, and we certainly look forward to speaking with you next quarter. Thank you.

[Martin Headley:]

Thank you.

[Operator:]

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Good day.