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Brooks Automation, Inc. (BRKS)
UBS 2012 Global Life Sciences Conference
September 20, 2012 2:00 PM EST
Steve Schwartz, President & Chief Executive Officer
Martin Headley, Executive Vice-President & Chief Financial Officer
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Thank you, Manit [ph]. Good afternoon everyone. First I would like to thank UBS for inviting us to the conference. This is our first time to be actually at a Life Sciences conference and I’ll explain the nature of that commentary and the history of the company and give you some idea as to why we are here and why we are really enthusiastic about our prospects in Life Sciences.
So what I would like to do, I’d like to introduce Brooks Life Science Systems business. It’s a $60 million business unit. It’s part of $500 million Company whose heritage is in the Semiconductor Automation space. So we are a $60 million Life Sciences business and we would to think of ourselves supported by a $500 company that brings technology, global presence, global reach and a cash position to help us to grow in this area that we find to be very exciting. Convergence if you will, are the core technologies of the company that we are going to apply to Life Sciences. In addition to the semiconductor franchise that we have, we have a roadmap for how do we continue to advance these core technologies to grow a very valuable space in Life Sciences, and that’s how we’ll spend our time and comments today.
First of all we are company that’s about growth both growths in the core space that we have in the business in and around the semiconductor automation industry and in the developing Life Sciences business where we believe we are the forefront of a very exciting area that relates to the automated Cryogenic storage of biological samples.
I want to give a little bit of history of the company from financial standpoint. I show here a look at a company five quarters ago. So we are looking at the March 2011 quarter, the semiconductor and the adjacent space that relates to the core businesses we have in and around semiconductor and electronics devices. We are $122 million in the quarter as the services that support those businesses in a very large installed base, about $22 million for the quarter. We also had a contract manufacturing business that made us an assembler if you will of some complex automation capabilities for large OEMs and the run rate of that business was approximately $200 million per year as a contract manufacturing business. The issues that we had in and around the contract manufacturing business it was in 11% gross margin business. So although very strong from a revenue standpoint and we were growing the business, it was tough to grow it as profitably as we were able to participate in the other parts of this space. We had no presence in life science but we did have a cash position $178 million of cash and no debt.
In the quarter ended June, just five quarters on the semiconductor business going through normal course of cycles was $108 million, the services business was approximately flat $22 million in the June quarter. But in June of 2011 we divested the contract manufacturing business, the proceeds of $80 million we invested back into Life Sciences. We are out of the contract manufacturing business, we are in the Life Sciences business and I’ll spend some time talking about that very specifically. But now we are in a business that generates 40% gross margin, we are able to grow the cash position of the company that will help us to fuel our future growth, we are $200 million of cash and no debt and we also instituted a quarterly dividend in the September quarter of 2011, $0.08 per share at current stock price that’s about a 4% dividend yield.
So a little bit about the semi – in what we call the core semi in the adjacent market place. It’s for automation and Cryogenic for places where we participate as a company, the movements of material in a controlled environment in a factory is around Robotics and between the Robotics and the Robotics’ systems, we have a business that is approximately $200 million of $500 million. And in and around Cryogenic, Cryogenics pumps to create a high vacuum for the manufacturer are very critical process steps in semiconductor. The Cryogenics’ business has given us about $150 million of revenue. We have about 30% market share with a significant amount of headroom here as we continue to make investments in around this $1.5 billion of available market.
The drivers for us that are different from the current cyclic nature of the semiconductor business relate not just to the semiconductor content but also to the form factors. So the mobility of devices is really changing the market opportunity that exists for us. When you look at an I-Pad for example, the active touch screen requires three thin layers of coding and those vacuum coding applications are performed by our PolyCold CryoChillers that are part of -- instrumental in those systems. These MEMS devices for accelerometers. For example, the things that keep the image upright when you rotate are MEMS devices and we serve those markets in addition to semiconductor as well. There’s been a strong opportunity led by LED and the organic LED and these are areas that we call adjacent spaces. We are investing heavily in the market that it relates to adjacent spaces that we have a core capabilities and technologies that allow us to expand beyond the normal growth in the semiconductor. And there’s one further dimension that is coming related to the changes in Wafer size, the way productivity gains are made in semiconductor is an addition to shrinking the line width in the technologies, the size of the Wafer, the number of guided manufacturer can made on specific Wafer continues to increase almost to one time for a ten year period. The industry is moving from 12 inch or 300 millimeter diameter Wafers now, in the next five years it will move to 450 millimeter diameter Wafers and there is a very distinct discontinuity that happens where all two of our architectures will be modified and changed again for us to replenish and rejuvenate our position in each of the markets where we participate when the industry moves to 450 millimeters.