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Brooks Automation, Inc. (BRKS)
F3Q13 Earnings Call
August 8, 2013 4:30 PM ET
Martin Headley – EVP and CFO
Steve Schwartz – President and CEO
Patrick Ho – Stifel Nicolaus
Edwin Mok – Needham & Company
Rohan Gallagher – Credit Suisse
David Duley – Steelhead Securities
Previous Statements by BRKS
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It is now my pleasure to turn the conference over to Mr. Martin Headley, Executive Vice President and Chief Financial Officer of Brooks Automation. Please go ahead sir.
Thank you very much, Lindsay and good afternoon, everybody. I’d like to welcome you all to the third quarter financial results conference call for Brooks’ fiscal year 2013. In addition to covering the results of the quarter that ended on June 30, we’ll be providing an outlook into the fourth quarter of our fiscal 2013 which will end on September 30.
Our press release was issued after the close of markets today and is available at the Investor Relations page of our website, www.brooks.com as are the illustrative PowerPoint slides we use during our prepared comments during today’s call. I’d like to remind everybody that during the course of the call, we’ll be making a number of forward-looking statements within the meaning of the Private Litigation Securities Act of 1995. There are many factors that may cause actual financial results or other events to differ from those identified in such forward-looking statements.
I’d refer you to the section of our earnings release titled Safe Harbor statement, the Safe Harbor slide in the aforementioned PowerPoint presentation on our website, on the company’s various filings with the SEC. We make no obligation to update these statements should future financial data or events occur that differ from forward-looking statements presented today.
I’d also like to note we’ll also make reference to a number of non-GAAP financial measures, which are used in addition to and in conjunction with results provided in accordance with GAAP. Management believes these non-GAAP measures provide an additional way viewing aspects of our operation and performance when considered with the GAAP financial results and the reconciliation of debt measures provide a more complete understanding of the Brooks business. Non-GAAP measures should not be relied upon to the exclusion of GAAP measures.
Brooks’ Chief Executive Officer Steve Schwartz will follow my introductory remarks with commentary on the business environment and our current initiatives. I’ll then provide an overview of the third quarter financial results and the summary of our financial outlook for the quarter ending September 30.
During our prepared remarks I will from time to time make reference to slide numbers on which relate to the slides which are available to everybody on the investor relations page of our website. To frame the events of the quarter, a summary is provided on slide three.
Our order bookings for the quarter grew 5.6% sequentially to $128.1 million, representing a book to bill of 1.08. Most notably bookings for our life sciences business doubled to 18.5 million as we successfully closed out several of the automated storage system orders that were in our pipeline.
Our revenues into front end semiconductor market declined as a result of our planned exit from certain low margin business. This contraction partially offset the $2.7 million sequential growth of revenues into industrial market and $0.5 million sequential growth of revenues into adjacent technology markets.
Brooks’ gross margins improved 150 basis points sequentially with expansion of margins in both elect sciences and global services segment. Our operating expenses were reduced in the quarter as a result of a $1.9 million reversal of stock compensation expense previously recognized for performance based restricted stock grants. We now project performance below the aggressive targets that would have resulted in those awards thrusting.
The favourable reported operating performance was somewhat offset by an abnormally high effective tax rate of 74%. This reflects that our previous projections for full year performance were based on ramp in business that is clearly not happening now and that we now project a lower full year tax rate of below our business levels. Consequently we are required to reverse tax benefits recognized in the first half of the year on the book losses incurred during those periods.
Given the non-cash flow nature of the tax adjustment and with strong cash returns from one of our joint ventures, we posted further improvements in cash flow generation with $12.9 million of cash flow from operations. And with that scene setting I will now introduce Steve Schwartz.
Thank you, Martin. Good afternoon everyone and thank you for joining our call. We are pleased to have the opportunity to report the results of the third quarter of our fiscal year. We had a very good Q3 as we were able to demonstrate significant progress on the key initiatives that have been our focus for more than a year. We continue to capture meaningful design-in wins at G OEMs for the semi and adjacent markets. We secured orders on large share of the life sciences systems business that we projected and operationally we delivered improved gross margins, another quarter of inventory reduction and strong cash flow.