Brooks Automation, Inc. ( BRKS)

F3Q 2011 Earnings Call

August 4, 2011 4:30 PM ET

Executives

Martin Headley – EVP and CFO

Stephen Schwartz – President and CEO

Analysts

Edwin Mok – Needham & Co. LLC

Farhan Ahmed – Credit Suisse

Patrick Ho – Stifel Nicolaus

Wenge Yang – Citigroup

Olga Levinzon – Barclays Capital

Ben Pang – Caris & Co.

David Duley

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Brooks Automation’s Third Quarter Financial Results Conference Call. I will be your operator for today. At this time, all participants are in listen-only mode, and later we’ll conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

And I would now like to turn the conference over to your host for today, Mr. Martin Headley, Executive Vice President and Chief Financial Officer. Please proceed.

Martin Headley

Thank you and good afternoon, everybody. I’d like to welcome each of you to the Brooks Automation, Inc. fiscal 2011 third quarter results call. Our press release was issued after the close of markets and is available on our website, 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 will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

There are number of factors that could cause actual financial results or other events to differ significantly from those identified in such forward-looking statements. And I 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’ll also make reference to a number of non-GAAP financial measures, which are used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP measures.

Management believes those financial measures provide an additional way of viewing aspects of our operations but, when viewed with our GAAP results and the reconciliations to GAAP measures, provide a more complete understanding of our business.

With me today is Brooks’ President and Chief Executive Officer, Steve Schwartz, who will open with some additional color, as it relates to some of the significant Brooks strategic activities, particularly providing more depth and understanding to the thinking around our acquisitions in the Life Science Systems space, the opportunities in this exciting area, and some comments on the current business environment.

I will then provide an overview of the third quarter fiscal 2011 financials and a summary of our financial outlook for the September quarter and the full fiscal year. We’ll then take your questions.

During our prepared remarks, we, will from time to time, make reference to the slides available to everybody online, at www.brooks.com, that are identified to assist in clarifying our comments.

And with that, let me introduce Steve Schwartz.

Stephen Schwartz

Thank you, Martin. In spite of a really rough day in the markets today, we are still pleased to report to you that we made significant progress against strategic initiatives that have been implemented over the last fiscal year to drive gains in market share and profitability in our current business, to expand our technical capabilities in the high growth markets, and to drive gross margin improvements with both funds for development of additional high-value technology products and increases the return to our shareholders.

I’ll now take a moment to update you on our progress against each of these initiatives. And then I will turn the call back to Martin, so he can give you detail around the financial performance from last quarter as well as our thoughts on forward guidance.

During the last nine months, we’ve significantly transformed the company to adapt ourselves to meet our aggressive growth objectives. We’ve hired extremely strong technical talent, and we’ve boosted RD&E spending by more than 30%, directing the bulk of that increased spending toward new product development and design wins. Year-on-year, this represents almost a doubling of the spend that is going to new product development with design win activity.

We’ve divested our contract manufacturing business to instead focus our efforts on high gross margin, high-value technology applications. We’ve targeted high growth product areas and regions of the world that have become very meaningful in terms of growth.

We’ve expanded our focus to invest in non-front-end semiconductor adjacent markets, which are being satisfied by a set of customers, which include many new equipment makers that are different from those who traditionally serve front-end semi.

Our new product design wins continued to accumulate and are starting to deliver meaningful gains for us. I’ll highlight a few of the most recent achievements here. On this call last quarter, we announced the shipment of our 10,000th vacuum robot from the MagnaTran product line. And in the June quarter, we passed another meaningful milestone when we shipped our 1,000th MagnaTran 8 vacuum robot.

Demand for our vacuum robots remained high, as we shipped MagnaTran 7 and 8 designs to nine first-time customers, representing equipment makers in six different countries. Included in this number were five new customers for the high-capacity version of the Mag 8 robot, whose unit shipments in the June quarter were more than double the volume in the March quarter.

These new Mag 8 high-capacity robot wins were shipped to customers in Taiwan, China, Europe and Japan for LED, OLED and another large substrate handling application. We also had new customer demand for atmospheric robots, as we shipped our Razor robot to two first-time customers – one in Korea and one in China – for semiconductor front-end applications, and we received orders from four other first-time customers.

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