Azenta Inc (AZTA) 2013 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Brooks Automation Q2 financial results conference call. During the presentation all participants will be in a listen only mode. Afterwards we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this call is being recorded Thursday, May 9, 2013.

I would now like to turn the conference over to Martin Headley, Executive Vice President and Chief Financial Officer. Please proceed.

Thank you very much, James, and afternoon everybody. I'd like to welcome each of you to the second-quarter financial results conference call for Brooks' financial year 2013.

In addition to covering the results of the quarter that ended on March 31, we will be providing an outlook into the third quarter of our fiscal 2013 that will end on June 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 to be used during our prepared comments during today's call.

I would like to remind everybody that during the course of the call we will 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 would 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 and 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 would like to note we will also be making reference to a number of non-GAAP financial measures which are used to, in addition to, and in conjunction with results provided in accordance with GAAP. Management believes these non-GAAP measures provide an additional way of viewing aspects of our operation and performance, when considered with the GAAP financial results and the reconciliation of GAAP measures provide a more complete understanding of the Brooks business. Non-GAAP measures should not be relied upon to the exclusion of GAAP measures.

With me today is Brooks President and Chief Executive Officer Steve Schwartz, who will follow my introductory remarks with some commentary on the business environment and our current initiatives. I will then provide an overview of the second-quarter financial results and a summary of our financial outlook for the quarter ending June 30, which is the third quarter of our fiscal year.

From time to time, I will make prepared remarks that make reference to the slides available to everybody on the investor relations page of our website. To frame the events of the quarter a summary is provided in slide 3.

We benefited from improved market conditions in semiconductor and generated a 50% increase in semiconductor front-end product revenues. We also saw improvements in demands for cryo products into general vacuum applications and our industrial product revenues increased 10%. As a result we exceeded the top end of our guidance range.

Also, in the technology side of our business, the integration of Crossing Automation, an acquisition that closed on October 29, 2012, continued apace and on track with our plans. As a result we generated profits from the transaction in the March quarter.

The Life Science Systems market conditions were challenging in the quarter, with a very cautious approach exhibited by our customers that resulted in delays in both facilitating project completion and making spending commitments. These delays impacted the timing of completion of larger projects, deliveries of smaller instruments and consumables, and some pullback in service activities. As a result, Life Science Systems posted $9.1 million in revenues for the quarter.

The order environment during the quarter improved, and our bookings in the quarter increased sequentially 30% over the December quarter to $121.3 million. This represented a book to bill of 104 on the Technology side of our business and a book to bill of 100 on the Life Sciences business. Favorable order trends continue into the current quarter.

Finally, we continue to execute on our balance sheet management goals and achieved improved receivables and inventory management performance that were significant contributors to our $10.7 million free cash flow generation in the quarter. With that scene setting, let me introduce Steve.

Thank you, Martin. Good afternoon everyone and thank you for joining our call. We are pleased to have the opportunity to be able to report the results of the second quarter of our fiscal year.

As many of our customers and peers have recently reported, December was definitely the low point in the semiconductor equipment cycle. In March the level of order activity picked up significantly, and although we still have higher expectations for the second half of the year, the 30% increase in bookings over the prior quarter was welcome news. Our March quarter revenue was slightly above the upper end of our expectations, as business was robust and we are able to satisfy some incremental turns business.

Our Life Science Systems revenue was slightly below forecast as we continued to wait for some delayed orders that are pending. All in, we are pleased by the strong growth in our semi and adjacent markets, as revenue grew more than 35% from the December quarter even assuming a full quarter of Crossing Automation revenue in the December quarter.

We attribute this higher than industry acceleration to a combination of the growth in the overall market, plus the marketshare gains we have been able to demonstrate as a result of our strong investment in design-in wins and new products.

In the March quarter, we had 15 OEM design wins, of which six were for front-end semi, two were for backend wafer processing applications that included a Spartan platform out of our Crossing Automation acquisition. And seven of the new design wins were for other adjacent and industrial applications.

One of the wins was for a 450 millimeter application for a new customer who we are particularly pleased to have been able to win after years of trying to get designed into their 300 millimeter wafer diameter platforms. It is a big win for us, and a good chance to gain more follow-on business with this important customer.

From a regional standpoint six of the wins were in Europe, five in North America and we had one each for customers in Japan, Korea, Taiwan and China.

We count an OEM design win when we receive the first order for product we have designed into a customer application. However, the design win is a necessary but not sufficient step toward making good business. What really counts is when these wins convert into follow-on business. That is, when the process tools that we are designed into are ultimately successful in the market, then we get volume business and begin to generate return from our investment.

So we track not only our design win activity, but also our follow-on conversion rate. And although the latter of these measures is more important to us, it is also out of our control.

We are particularly pleased that in the March quarter we received first-time follow-on orders for 16 different past design wins, making it the strongest quarter since we started to track this metric in terms of hit rate for our design wins. We believe that in this next upturn these marketshare gains will continue to drive even more revenue from the business we have worked very hard to win.

To put a bit more color on the impact of our product development and design win investments, in fiscal year 2012 we finished the year with 44% of our product revenue coming from new products or products that were modified to be designed in to new customer applications. We are tracking well toward our fiscal 2013 target of 50% of product revenue to be from these new product offerings.

We plan to continue our investment in design wins and marketshare gains, but at the same time we believe that we are investing at a level that is adequate to put ourselves in the running for all meaningful pieces of business that are available.

In our Life Science Systems business we won one new system at a pharmaceutical company. And we were awarded upgrade projects to refurbish installed cold storage systems at two large pharmaceutical companies, one in North America and one in Europe.

With the rising demand for biological sample storage, we are seeing strong growth in market segments which include off-site or outsourced sample storage providers, and contract research providers to the pharmaceutical market. We were pleased to complete the commissioning of our first BioStore system into this growing market in the second quarter.

The automated cold storage market originated almost 20 years ago and was driven by pharmaceutical companies' needs to store and track millions of chemical compounds. By and large, for the last 10 years the pharma companies have been relatively steady purchasers of stores, consumables, devices, and service and support contracts. And we and our competitors have been the beneficiaries of this business.

However, during the last two quarters as the pharma industry has continued to consolidate and relocate, we have seen a pause in spending, not only for the cold stores, but also for the consumables and devices that are used in conjunction with our stores. What spending we have seen lately from pharma is for tool upgrades to extend the life of older stores, and/or to enhance the performance of installed tools.

2013 has started slowly for us, and for other lab tool companies. And we are only now beginning to get a sense that spending decisions are being made and orders are forthcoming.

While cold storage of compounds for big pharma customers will continue to provide revenue opportunities, we see most of the growth potential coming from the storage of biological samples driven by the rapid move to personalized medicine. We've been driving our product development activities to bring technologies to serve the growing and more demanding biostorage market.

In the quarter we delivered on some significant internal development milestones in the Life Science Systems business that are important for our future in terms of advancements in our product portfolio. Since entering this business we have been working on a family of new products that address this sample storage market opportunity. This includes three configurations of new cold stores.

The first is for products that we call the BioStore II, and SampleStore II, which are high capacity, high density cold stores for biological and chemical compound storage respectively. These systems are the first Brooks-designed products, and they combined the best of the product characteristics from the companies that we acquired with technologies and engineering capabilities from Brooks.

We already have a win for one of these systems that we plan to install in the September quarter, and we anticipate more business coming as the cost performance capability and sample storage density is far greater than any other systems in our portfolio or currently offered by anyone else in the market.

A third new product is a relatively small automated unit that is being developed for a large OEM provider of clinical diagnostic systems who will integrate our Compact Store into their integrated workflow product offering for hospital and clinical applications. The product performs to design specifications and offers the potential for new and steady business stream that will be meaningful and measurable starting in about 18 months.

This advancement of the product portfolio is an investment in the future of this business, but also brings products to market which will help to accelerate the transition from manual storage of critical biologic samples to safer, higher quality and more economical automated systems. We believe that we are now in a period where the storage systems business will begin to grow again.

In the March quarter, our total bookings were approximately $9 million. However, approximately half of this occurred in the final month of the quarter. As a result, while the June quarter will be approximately flat, around this $9 million level, before the business begins to rebound in the September quarter.

In recent weeks we have received verbal indications that we will receive contract awards from some significant projects. The timing of these projects turning to revenue is uncertain until commercial agreements are fully negotiated. All told, we believe that there will be at least $15 million worth of automated cold store systems business awarded in the June quarter, and we are very competitive in each of these opportunities.

Even though we have experienced a lull in bookings, we are committed to this business in the near term and especially in the longer term. And we believe firmly that our investment in new product development will bring a significant return as we continue developing this exciting new market. We are confident that our product lineup, technical capability and global footprint for sales and service will allow us to continue to build on our already market-leading position.

For the June quarter, our guidance of flat to up approximately 5% in revenue is made up of our estimate for roughly flat Life Sciences business and approximately flat revenue from semi and adjacent markets, as we do feel the impact of a slight pause in our customer shipments to foundries. It is important to note that in the June quarter our guidance is net of a decrease in revenue of approximately 4% that is the intentional result of us as getting from some unprofitable product lines.

We have been working with customers over the last several quarters to allow them to find other sources of supply, as we have end-of-lifed certain products that we have identified as unprofitable.

As we look toward the remainder of the year, we are positive about how the back half of the calendar year is shaping up for both semi and adjacent markets and Life Sciences. We are confident that the market share gains we are making in all of our businesses positions us extremely well for the future.

I will now turn the call back over to Martin.

Thank you very much, Steve. Slide number 4 reflects the impact of the 19% sequential increase in revenues from $98 million in the December quarter to $116.6 million in the March quarter. Gross profits improved by $6.1 million to $37.4 million, a gross margin rate of 32.1%. The variable contribution was limited by the decline in our highest margin rate segment, the Life Science Systems business.

We spent $0.5 million more on research and development, most notably associated with the new products for automated sample management stores that Steve noted in our Life Science Systems business.

Selling, general and administrative expenses were reduced by $0.6 million, although there were a number of moving pieces here which are best explained by the waterfall chart, slide number 5.

We had a reduction in intangibles amortization of $0.6 million related to the Helix acquisition of 2005, as a number of the intangibles were completely amortized.

We also saw a $0.8 million impact to SG&A from the restructuring actions taken during the December quarter.

Organic revenue growth in the Brooks Product Solutions segment of $19.2 million generated a 36% drop-through to operating profit, a $7.8 million increase in profits. This was slightly below our target drop-through as a result of certain low-margin situations. We have addressed some of these and I will talk more about this when discussing our guidance.

The revenue contraction in our Life Science Systems business had a particularly significant impact, as nearly $1 million of the revenues in the December quarter were extremely high margin software revenues that did not repeat in the March quarter.

Additionally, as I mentioned, we had higher research and development spending associated with a significant product rollout.

The Brooks Global Services business generated 4.5% organic growth from the first quarter to the second quarter and a 50% drop-through from that growth.

Finally, the full quarter impact of the Crossing acquisition was a [$3.7 million] increase in additional revenues and $1 million of additional profits.

As slide number 6 shows, the GAAP net profit for the second quarter -- a GAAP net loss for the second quarter of fiscal 2013 was $0.5 million or $0.01 per diluted share, which includes special charges of $1.6 million pretax, being the restructuring and integration charges of $800,000 and purchase accounting adjustments of $800,000.

Adjusted net profit excluding these charges was $600,000 or $0.01 per share. For those of you who look at adjusted earnings excluding stock compensation expense, those adjusted earnings were $0.05 in the quarter, as compared to a loss of $0.02 in the first quarter of the fiscal year.

Our effective tax rate in the quarter was 20%, but we continue to expect an effective tax rate of 28% for the balance of the fiscal year with only about one-third of that charge giving rise to cash taxes. The non-cash tax impact creates issue with comparability of results, thus we believe looking at our adjusted EBITDA trends as an alternative is instructive. Slide number 7 illustrates this trend.

A reconciliation of this non-GAAP measure to the appropriate GAAP comparison is included as an attachment to our press release.

Adjusted EBITDA was $9.2 million in the quarter. We are just slightly lower than an average 32% drop-through as a result of the quarter's contraction of the Life Science Systems business.

Slide number 8 portrays how earnings and balance sheet performance contributed to the healthy cash flow performance in the quarter. We closed the quarter with $145.6 million of cash and marketable securities.

As slide number 9 shows, we had improvements in both receivables and inventory performance in the quarter, with an $8.5 million reduction in net inventories while supporting strong growth in our technology businesses. Receivables represented 57 days of sales and improvement of 2 days from the [59] days of sales at the end of December.

During the quarter we sold part of the Swiss campus, but reduced our investment in fixed assets by $2 million. We continue to monitor capital requirements closely and continue to believe that full year requirements will result in capital expenditures of between $6 million and $8 million.

Beginning on slide number 10 we break out results for each of our three segments in the second quarter of fiscal 2013. In the Brooks Life Sciences business the cautious market environment exacerbated the lumpy trends. The variable contribution loss from the decline was marked, and the business experienced high research and development expense around important new products.

All of this served to overwhelm some of the traction that we had made in streamlining the fixed cost base. We will face another challenging quarter for this business in June, but have a high degree of assurance around a very high revenue quarter to close out the fiscal year.

Turning to slide number 11, we are presenting the sequential performance of the Brooks Product Solutions segment excluding the fair value purchase price adjustments excluded from our adjusted earnings.

As I noted earlier, organic revenues into front-end semiconductor were up $20.2 million or 50%, while industrial revenues increased by $900,000 or 10%. Gross margins improved by 280 basis points to 32.8% with both volume leverage and some supply-chain benefits.

With no additional cost despite a full quarter of the Crossing business, the segment turned to operating profits of $3.8 million from the loss in the December trough quarter.

On slide number 12 we address the Brooks Global Services segment. Again, these are non-GAAP numbers to exclude fair value purchase accounting adjustments related to Crossing Automation.

We experienced the 4.5% organic growth together with a full quarter of the Crossing service business. Gross margins improved 160 basis points to 30.6%. And overall the segment produced $2.2 million of segment operating profit at a 10.1% margin. We look to good volume leverage in this segment as the process of integrating the service capabilities of Brooks and Crossing continues.

On slide number 13 we have a graphic representation of the quarterly revenue trends of the business since fiscal 2010, excluding the divested contract manufacturing business. Additionally, in the appendix for the call slide presentation we provide the absolute numbers behind this chart. This data is extremely important, since we note inaccuracies and some industry and analytic resources that inappropriately suggest significant declining market share for our Technology businesses.

The chart also displays the midpoint of our guidance for the June quarter. We continue to see growth in front-end semiconductor in adjacent markets, although we project a flat to down quarter in industrial markets. Our expectations are moderated by the exit or end-of-life of some of the lower margin products that Steve made reference to.

The handful of large, automated SampleStore opportunities that our Life Sciences business has successfully pursued will not have a meaningful impact on the third-quarter revenues. We see a flat to slightly down quarter for this business. But, as Steve indicated, activity is lining up for a better September quarter into these markets.

Accordingly, we provide guidance as summarized on slide number 14 of revenues between $116 million and $124 million. The guidance is flat to growth of 10%, taking into account the actions that we are proactively talking -- taking to address low-margin business, which reflects an underlying growth of 4% to 10%.

Off of these levels of revenue we guide adjusted EBITDA to between $10 million and $14 million for the June quarter. Embedded in this guidance is continued gross margin improvement and some additional operating expenses associated with enhancing commercial and general management capabilities.

This will translate to adjusted bottom-line performance of between $0.01 and $0.05 per diluted share. Excluded from these projections are some residual restructuring expenses associated with the actions already announced. Consequently, our guidance for GAAP diluted earnings per share is between breakeven and $0.04 a share.

Finally, we announced that our Board of Directors has declared a dividend of $0.08 per share payable on March 7 -- on June 7, 2013, to stockholders of record as of June 28, 2013. With that I will turn over the call to James for questions.

(Operator Instructions). David Duley, Steelhead Securities.

I was just wondering, you made some comments about having a strong second half of the calendar year, I believe. Could you talk a little bit about why you think that is going to happen? And then, also address, I think, the comments -- prepared comments about a pause in foundry shipments or spending?

Hi, Dave, it is Steve. Let me go backwards on your questions. On the first one, just even the last three or four weeks, we have seen some push outs of systems that we had expected in June out into the September quarter. So that is some push outs related to business ultimately that was headed toward foundries. And I think it is consistent with what other companies have reported.

In terms of the back half of the year, the forecast that the account teams are putting together are certainly stronger compared to where we are today. We don't know what level yet, but the indications we are getting from an order standpoint give us a reasonable level of confidence that there will be some pickup, at least beginning in the September quarter.

And do you see -- what kind of order -- do you see orders growing in the June quarter in total for Brooks?

We are certainly seeing a trend consistent with that, if it holds up through the balance of the quarter.

Okay, and then just a final question for me and I will turn it over to somebody else. Could you talk a little bit about the life science cost structure? -- Life Science cost structure? I realize you have tried to downsize it, but it seems like we have been waiting a long time for the revenue to grow here. So, how much longer are we going to wait before we address that? And what kind of timeframe are we looking at, and are you happy with the cost structure now, I guess?

Yes, hi, Dave. So, obviously, we are not pleased with the revenue line or the profitability of the business. But as I mentioned in my comments, we are absolutely committed to the market, committed to the products that we have developed to address the biological side of the business.

We think we have the right products in place and we are winning the business that is available. So we have very high market share. The things that we know about, we are able to bring home.

The spending from a percentage standpoint is very high. And it will be resolved as we get the revenue up.

We indicated that we've got some indications that bookings will improve in the current quarter. Once we are able to book the systems, we will get them under contract. And we feel that the growth is coming here toward the back half of the year.

But even orders in the June quarter won't be as meaningful for revenue in the June quarter, certainly. It will start to show up in September and the more meaningfully in December. But we do feel the growth is returning to the business and we are probably within a couple of quarters of hopefully being able to return the business to profitability. And we are definitely making the investments in the products to continue to grow the business.

Okay, thanks.

Patrick Ho, Stifel Nicolaus.

Thank you very much. Steve, maybe first on the semiconductor side, some of the design wins that you mentioned in your prepared remarks, can you tell how much of it was for advanced packaging type of applications? Or was that just too difficult to characterize or break apart from where you're getting these design wins?

Patrick, we had two that are for advanced packaging. So there were two important and meaningful ones, and I'm looking for Martin right now to see -- at the backend advanced packaging run rate.

The backend advanced packaging run rate is now getting up over $25 million on an annualized rate. So it continues to incrementally increase. And we have got a good business building here, which you will appreciate came from next to [less] nothing not too long ago.

Great, maybe just a quick follow-up on that. Given that you are a component supplier to the OEMs and others, in terms of this marketplace, how do you see the traction of that process technique gaining hold? Do you see this as something that really gained steam in 2013, or is this still probably more a 2014 or 2015 story?

Gosh, Patrick, we don't know. We are getting designed in -- we're not as close to it, but a broader indication is that it is kind of a 2014/2015 story.

Okay, great. And maybe just on -- one question on the Life Sciences end. I know we have talked about the cold storage business both from the biopharma as well as the biological sample segments that you're targeting.

And if you could correct me if I'm wrong, biopharma was the more saturated and mature market, and the growth opportunities was in the biological sample side. Are you not seeing enough traction there are to offset some of the, I guess, the government funding delays and some of the slowdown in spending on the pharma side? Or is the biological sample growth story still further out from, I guess when I initially may have thought that traction was taking place?

Yes, Patrick, I think we are seeing a little bit more lumpiness than we anticipated. So pharma and the BioStores have been slow here in the last two quarters. Both are picking up in the June quarter.

Great, thank you very much.

Jairam Nathan, Sidoti.

I just wanted to first get a clarification. There were two numbers that were thrown out about [the 9 -- or in the] Life Sciences orders. One was a $9 million number and a $15 million number. Can you just rehash that? What was the $15 million?

Sure. This is Steve. So we booked $9 million in the quarter for Life Sciences. And as we track the product pipeline, we look at the large projects that we think will be awarded at a particular time.

By our estimation we believe that in the June quarter there will be something like $15 million of large store projects for systems that are awarded. And we are competing for each of those that we are aware of. So we are competing for what we think will be an available booking market, if you will, in the June quarter of $15 million for the systems.

Okay, and given the challenges in the Life Sciences, are you seeing any pricing pressure? I know there is probably only one other competition, but are you seeing any of that?

Nope, it is not -- this is not an issue about pricing. This is about are the projects going to be awarded in one quarter or the next right now. So it is not -- although bids are competitive, we are not -- we are typically not in a pricing battle.

Okay, and my last question is on operating expense. We saw that flatten from 1Q to 2Q. And given the restructuring actions that you have taken, how should we think about that going forward?

This is Martin. I think you should take note of my comments about the need to put in some additional commercial and general management resources. This is not replacing people from restructuring actions. This is newly created positions.

And that probably will slightly increase the OpEx in the third and fourth quarters versus the current levels. So you will see a slight increase in research and development and a flattish kind of SG&A level where the benefits of prior actions are offset by some, as I say, some of the additional resources that need to go into the businesses.

Okay, thank you.

Satya Kumar, Credit Suisse.

This is Farhan asking a question on behalf of Satya. Thanks for taking the question. I wanted to talk to you about the margins on the Life Sciences business. How should we think about margins in June? And how should we think about recovery in the Life Sciences gross margin?

Clearly, what you saw with the 28.9% gross margins in the March quarter was a trough that was created by a very low absorption of fixed costs. We believe that that is a trough and that we can make some modest level of improvement into the June quarter.

But you're talking about recovery of the revenue line back to levels that we have seen before to get us back over 40%. And that is what we would be targeting, if the business comes through as we believe it is going to in the September quarter.

And, also, on Life Sciences you mentioned there was some software revenue that was pushed out, so just wanted to understand the mix portion of it. How should we think about that business as related to software? Is that coming back and we should think about gross margins in similar level at December around similar revenues? Or is that a decline?

In December? We would continue to believe, given the likely strength in the revenues, given the very strong pipeline of large projects, that certainly if they don't hit fully in September, should make a nice contribution to the December quarter, should enable a continuation of those 40%-plus margin levels into the December quarter.

We will have some modest level of software revenues along the way. It will be nothing like as meaningful as it was in the first quarter of this fiscal year that produced the slightly outsized gross margin levels for the revenue levels we had.

And then one question on your new customer. It feels like this customer is one of the large OEMs. Is it fair to say it is a fairly large OEM and not a small customer?

Yes, is that in reference to the 450 millimeter win?

Yes, you mentioned that there was a new customer for the first time that you won the 450 millimeter business.

Yes. I am sorry, and the question?

And the question was is that like one of the major customers that you previously did not have? It is one of the large semi cap OEMs or is it --?

Yes, it is (multiple speakers) -- because it was -- because it is a new customer, all of the -- I think the ones we consider to be the largest OEMs are already existing customers. But this would be a next tier, very important, very successful customer, but it would be considered a Tier 2 provider, but one that can drive a lot of volume.

Got it. Thank you. That is all I had.

(Operator Instructions). Ben Pang, B. Riley & Co.

First, just a clarification on the Life Sciences. Somebody asked a question earlier about the order served available market or opportunity. It is the $15 million your total booking opportunity for all the different verticals in that space that you serve?

No, in just the systems. And historically our systems business has been about 50% of revenue.

Okay.

And so the projects that we are talking about really are only the cold store systems booking opportunity.

So, I guess, based on your commentary about flat orders, your expectation is you would just get one-third of that? Is that how I think about it?

No, let me try again. So the part that will be flat is the $9 million revenue in the March quarter -- will be flat to slightly down, maybe in the June quarter, in the current quarter.

Okay, but was your book to bill also going to be 1?

Yes, so we booked $9 million in the March quarter, and we anticipate to have considerably more success than that in the June quarter (multiple speakers).

Okay, okay (multiple speakers).

We would see a significantly better than 1 book to bill for the Life Sciences business in the June quarter is the likely (multiple speakers).

Okay, I was confused with the math here.

We are about 65%-plus share in the cold store business wins and we don't intend to step backward here.

Okay. In terms of the semiconductor business, are your tier 1 customers -- or are your Tier 2 customers as strong as the Tier 1 guys? Is there any difference between the momentum you are seeing with the larger equipment providers versus the smaller ones?

We have seen strong momentum in the larger guys. I think in the second tier it matters geographically where they are. We have seen weaker demands from our Korean OEM customer base, because of the much lower levels of activity going on within Korea. So it is more geographically-based than anything else.

Okay, and then on the Crossings Automation, you commented about $3.2 million, I think, of revenue contribution. Is that correct?

Incrementally, yes.

Okay. Was the (multiple speakers) run rate (multiple speakers)

That means about $13 million of Crossing business in the quarter.

Okay, that clarifies that for me. And my final question in terms of the other segment, are you guys starting to see the display business, your display applications pick up?

Not meaningfully different from where we have been.

Is that surprising to you, or do you have a different forecast for the year or --?

Not surprising in the sense that there are inventory situations to take into account. But other than that, we are seeing high level of discussion around future orders, so it is consistent with other commentary you have seen about that space.

So it is pent-up potential and we are preparing, but at present, not yet.

Excellent, and congratulations. A very good quarter. Thank you.

Edwin Mok, Needham & Company.

The first question is I think last quarter you guys talked about winning a vacuum robot at a major Japanese customer. Did that revenue ramp in this quarter? And how do you think about that business opportunity there?

At this stage, it is an early stage of a production tool. That has not ramped at this stage. We think it is a well-positioned application from a well-positioned OEM. But we haven't seen anything that really moved the needle in the current quarter.

Great, that's helpful. And then second question is, if I take your front-end customer -- or the revenue coming from the front-end side plus the incremental industrial revenue that you mentioned, it seems like you guys got a little bit more growth beyond that on the non-semi area. Can you help us out in terms of explaining why you have that growth?

In the non-semi area?

Yes, what was the driving the growth on non-semi area (multiple speakers) question.

If you look at the non-semi area, besides industrial we basically saw about roughly a $2 million improvement in products into adjacent technology markets. The biggest part of that movement was associated with backend semiconductor. So as we previously made reference to, we are continuing to improve our penetration into what we believe is going to be a very significantly growing area for wafer level movements in the backend.

Great, thanks for reconciling that for me. And then the third question is if I take your guidance, right, and backing -- or adding back the, roughly, I think you said $4 million worth of business that you guys are exiting, right. And then based on the assumption that Life Sciences is flattish, industrial is going to be kind of flattish too, potentially even down a little bit.

That would imply semi actually is growing quite robustly, as a midpoint maybe about 10% sequentially (multiple speakers). Did I get that math correctly there? Or how do I (multiple speakers) think about that?

No, you have got that exactly right. We find the front-end semi business, although it is taking a pause, it is still a growing market for us. And we are encouraged, because of that, about the potential for what might happen in the back half of the year even though it is a very cloudy situation.

Great, thanks for clarifying that. And then one quick question on the Life Sciences. The $15 million opportunity that you guys are going after, am I clear that -- [what you think is those are options]. You don't necessarily win all of them historically. You win around 65% [of the trend] that you go after, but that is only system. And on top of that you're going to get some incremental parts and service revenue. Is that the way to think about that?

Yes, the way is typically you look at the run rate that we been going after with consumables, services and devices. That has been somewhere in the $6 million to $8 million range. It took a little bit of a pause in the March quarter.

So you have got that level of business going on, as well as the opportunities that come from these handfuls of very significant larger store opportunities. But, frankly, we feel very, very strongly placed and we are going to try and win them all. Whether we will, we will see.

Great. One last question. Martin, we really like you, but just curious where the CFO search is going? Where are we on that process?

We are still in process and we have been fortunate to see some good candidates, but as soon as we are definitive we will announce for sure. But we are still in the process.

What is the timeframe for that? Maybe that is a better way to ask that.

We are certainly ready. It is going to take us a little bit of time, but Martin has graciously agreed to stay with us into the summer and we are going to take him up on that through a transition, we hope.

Great, that is all I have. Thank you.

There are no further questions from the phone lines at this time. I will turn the call back to you.

Okay, thank you everyone for your interest in Brooks, and we do look forward to speaking with you when we report our results for fiscal 2013 third quarter. Thank you.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. Thank you.