Brooks Automation Reports Results of Fiscal Second Quarter of 2018, Ended March 31, 2018

CHELMSFORD, Mass., May 1, 2018 /PRNewswire/ -- Brooks Automation, Inc. (Nasdaq: BRKS), a leading worldwide provider of automation and cryogenic solutions for multiple markets including semiconductor manufacturing and life sciences, today reported financial results for the second quarter of 2018, ended March 31, 2018.

Fiscal Second Quarter of 2018 Financial and Operational Highlights:

• Revenue was $207 million, 9% higher compared to 2018 Q1 and 22% higher compared to 2017 Q2;
• Life Sciences segment revenue was $49 million, 2% higher compared to 2018 Q1 and 40% higher compared to 2017 Q2;
• Semiconductor Solutions Group segment revenue was $159 million, 12% higher compared to 2018 Q1 and 18% higher compared to 2017 Q2;
• GAAP Net Income was $67 million with diluted EPS of $0.95;
• Non-GAAP Net Income was $28 million with diluted EPS of $0.40; and
• Cash flow from operations was $20 million.

A reconciliation of non-GAAP measures to the most nearly comparable GAAP measures follows the consolidated balance sheets, statements of operations and statements of cash flows included in this release.

Management Comments 
"Our second quarter 2018 results continue to highlight the strength of our business model and the leadership positions we hold in our two operating segments," commented Steve Schwartz, CEO of Brooks Automation. "The Semiconductor Solutions Group delivered outstanding year-over-year revenue growth on the strength of our vacuum automation portfolio. Life Sciences grew 40% year-over-year, recorded its eleventh consecutive quarter of sequential revenue growth, produced record operating profits, and is tracking to achieve its targeted 10% operating margin by our fourth fiscal quarter.  In April, we closed on two acquisitions that broaden our base for growth and continued momentum."

GAAP Summary 
Revenue for the second quarter of fiscal 2018 increased 9% to $207 million compared to the first quarter of fiscal 2018. The growth was driven by a 12% increase in the Brooks Semiconductor Solutions Group segment and a 2% increase in the Brooks Life Sciences segment. Gross profit margin was 40.6%, up 90 basis points from the first quarter of fiscal 2018.  Operating expenses of $60 million increased 11%, or $6 million, from the previous quarter due to higher variable compensation and professional services, including M&A expenses.  The company reported a $44 million benefit in income tax expense, driven by a $46 million reversal of the valuation allowance reserve against U.S. deferred income tax assets.  In accounting for the valuation allowance release in the quarter, the Company considered the first quarter estimated impact of $5 million related to the toll charge under US Tax Reform, which was previously noted to be offset with fully reserved tax attributes. GAAP net income in the quarter was $67 million and diluted earnings per share was $0.95.

The amortization of intangible assets, restructuring charges, impact of purchase price accounting adjustments, charges related to M&A and special charges are appropriately included in the GAAP summary of earnings discussed above. The impact on earnings of such non-GAAP adjustments is referenced in the unaudited table included within this press release.

In the following analysis of the non-GAAP results, Brooks adjusted the GAAP results for the impact of amortization of intangible assets, restructuring charges, purchase price accounting adjustments and charges related to M&A to provide investors better perspective on the results of operations, which the Company believes is more comparable to the similar analysis provided by its peers. Brooks also excludes special charges or gains, such as impairment losses, gains or losses from the sale of assets, as well as other gains and charges that are assessed to not be representative of the normal operations of the business. In this context, the Company has also removed the effect of reversing the valuation allowance reserve on the U.S. deferred income tax assets. 

Results of Q2 Fiscal 2018 (Non-GAAP Discussion) 
Non-GAAP net income was $28 million in the second quarter, resulting in non-GAAP earnings per share of $0.40.  On a non-GAAP basis, both income measures were 26% higher than in the first quarter of 2018 and 42% higher compared to the second fiscal quarter of 2017.

As noted above, revenue for the second fiscal quarter of 2018 was $207 million, up 9% compared to the first quarter of 2018 and 22% higher than the second quarter of 2017.  The Semiconductor Solutions segment revenue of $159 million was 12%, or $17 million, higher compared sequentially to the first fiscal quarter. The Life Sciences segment revenue was $49 million, 2% higher sequentially and 40% higher compared to the second quarter of 2017.  On an organic basis, the Life Sciences segment revenue increased 16% year over year.    

Adjusted gross margin, which excludes amortization, purchase accounting impacts, and special charges, was 41.1% in the second quarter and improved 30 basis points from the prior quarter.  The Life Sciences segment drove the improvement with non-GAAP adjusted gross margin of 39.8% in the second quarter, 340 basis points higher than the first quarter.  The sequential improvement in the Life Sciences segment was driven by improved margins in core infrastructure products and a more favorable mix of storage services revenue this quarter.  As explained in the prior quarter, genomics services, which are performed by a subcontractor and carry lower margins, have a seasonal peak in December and are lower in the March quarter, providing the improved mix.  The Semiconductor Solutions segment non-GAAP adjusted gross margin was 41.5% in the second quarter, which was 80 basis points lower than last quarter's results, reflecting a weaker mix of product revenue which carried higher production costs.  In summary, the total non-GAAP adjusted gross profit of $85 million increased $8 million compared to the prior quarter, driven by revenue expansion in both segments and significant margin expansion in Life Sciences.

Bookings for the Semiconductor Solutions segment in the second quarter totaled $184 million, compared to $166 million in the first quarter.  The Life Sciences segment booked a total of $54 million of new contract value in the second quarter, compared to $59 million in the first quarter.   

Non-GAAP operating expense of $53 million increased $4 million compared to the prior quarter, driven by higher variable compensation accruals and professional services.

Adjusted income from operations in the second quarter was $32 million, increasing 14% compared to the first quarter and 51% compared to the second fiscal quarter of 2017.  The second quarter operating margin was 15.5%, expanding 70 basis points sequentially and 290 basis points year-over-year.  The second quarter segment operating margins were 19.8% in Semiconductor Solutions and 6.4% in Life Sciences, both increasing sequentially and year-over-year.   

Non-Operating expenses, including net interest expense and foreign exchange impacts, improved 43% in the second quarter compared to the first quarter of 2018.  Net interest expense of $1.8 million for the quarter, was 9% lower than the first quarter.  Foreign exchange losses of $0.5 million in the second quarter were $1.5 million less compared to the first quarter.  Separately, joint venture earnings provided $1.4 million of income net of tax in the second quarter, which was $0.8 million lower than in the first quarter.

Cash flow from operations was $20 million in the second quarter bringing the total of cash, cash equivalents, and marketable securities to $245 million as of March 31, 2018 compared to $232 million at the end of the first quarter.  Following the close of the quarter, the Company closed on two separate acquisitions, which used $16 million of cash, net of cash received, to date.

Quarterly Cash Dividend 
The Company additionally announced that the Board of Directors has reiterated a dividend of $0.10 per share payable on June 22, 2018 to stockholders of record on June 1, 2018. Future dividend declarations, as well as the record and payment dates for such dividends, are subject to the final determination of the Company's Board of Directors.

Guidance for Fiscal Third Quarter 2018 
The Company announced revenue and earnings guidance for the third quarter of fiscal 2018. Revenue is expected to be in the range of $215 million to $225 million and non-GAAP diluted earnings per share is expected to be in the range of $0.40 to $0.46.  GAAP diluted earnings per share for the third quarter is expected to be in the range of $0.28 to $0.34, reflecting the anticipated impact of amortization, purchase price accounting, and restructuring.

Conference Call 
Brooks management will webcast its second quarter earnings conference call today at 4:30 p.m. Eastern Time. During the call, Company management will respond to questions concerning, but not limited to, the Company's financial performance, business conditions and industry outlook.  Management's responses could contain information that has not been previously disclosed.

The call will be broadcast live over the Internet and, together with presentation materials referenced on the call, will be hosted at the Investor Relations section of Brooks' website at www.brooks.com, and will be archived online on this website for convenient on-demand replay. In addition, you may call 800-908-8792 (US & Canada only) or 303-223-0118 to listen to the live webcast.

About Brooks Automation, Inc. 
Brooks is a leading worldwide provider of automation and cryogenic solutions for multiple markets including semiconductor manufacturing and life sciences. Brooks' technologies, engineering competencies and global service capabilities provide customers speed to market and ensure high uptime and rapid response, which equate to superior value in their mission-critical controlled environments.  Since 1978, Brooks has been a leading partner to the global semiconductor manufacturing market as a provider of precision automation and cryogenic vacuum solutions.  Since 2011, Brooks has applied its automation and cryogenics expertise to meet the sample storage needs of customers in the life sciences industry.  Brooks' life sciences offerings include a broad range of products and services for on-site infrastructure for sample management in temperatures of ‑20°C to -150°C, as well as comprehensive outsource service solutions across the complete life cycle of biological samples including collection, transportation, processing, storage, protection, retrieval and disposal.  Brooks is headquartered in Chelmsford, MA, with operations in North America, Europe and Asia. For more information, visit www.brooks.com.

"Safe Harbor Statement" under Section 21E of the Securities Exchange Act of 1934 
Some statements in this release are forward-looking statements made under Section 21E of the Securities Exchange Act of 1934. These statements are neither promises nor guarantees but involve risks and uncertainties, both known and unknown, that could cause Brooks' financial and business results to differ materially from our expectations. They are based on the facts known to management at the time they are made. These forward-looking statements include, but are not limited to statements about our revenue and earnings expectations, our ability to increase our profitability, our ability to improve or retain our market position, and our ability to deliver financial success in the future. Factors that could cause results to differ from our expectations include the following:  the volatility of the industries the Company serves, particularly the semiconductor industry; our possible inability to meet demand for our products due to difficulties in obtaining components and materials from our suppliers in required quantities and of required quality; the inability of customers to make payments to us when due; the timing and effectiveness of cost reduction and cost control measures; price competition; disputes concerning intellectual property; uncertainties in global political and economic conditions, and other factors and other risks, including those that we have described in our filings with the Securities and Exchange Commission, including but not limited to our Annual Report on Form 10-K, current reports on Form 8-K and our quarterly reports on Form 10-Q. As a result we can provide no assurance that our future results will not be materially different from those projected. Brooks expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statement to reflect any change in our expectations or any change in events, conditions or circumstances on which any such statement is based. Brooks undertakes no obligation to update the information contained in this press release.

CONTACTS:
Sherry Dinsmore
Brooks Automation
978.262.2400
sherry.dinsmore@brooks.com

John Mills
Partner
ICR, LLC
646.277.1254
john.mills@icrinc.com

Notes on Non-GAAP Financial Measures:

These financial measures 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 financial measures. Management adjusted the GAAP results for the impact of amortization of intangible assets, restructuring charges, purchase price accounting adjustments and charges related to M&A to provide investors better perspective on the results of operations which the Company believes is more comparable to the similar analysis provided by its peers. Management also excludes special charges and gains, such as impairment losses, gains and losses from the sale of assets, as well as other gains and charges that are not representative of the normal operations of the business. In this context, the Company has also removed the effect of reversing the valuation allowance reserve on the U.S. deferred income tax assets.  Management strongly encourages investors to review our financial statements and publicly-filed reports in their entirety and not rely on any single measure.