萬機儀器 (MKSI) 2014 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to MKS Instruments third quarter 2014 Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time.

(Operator Instructions). As a reminder this conference is being recorded. And I would now like to introduce your host for today's conference, Vice President and Chief Financial Officer Seth Bagshaw. You may begin.

Thank you. Good morning everyone. I'm Seth Bagshaw, Vice President [and] Chief Financial Officer. And I'm joined this morning by [Gerry] Colella, our Chief Executive Officer and President. Thank you for joining our Earnings Conference Call.

Yesterday, after market closed, we released our financial results for the third quarter of 2014. You can access this release at our website, www.MKSInstruments.com. As a reminder, various remarks that we may make about future expectations, plans and prospects for MKS comprise forward-looking statements.

Actual results may differ materially from those indicated by these forward-looking statements. As a result, there are various important factors, including those discussed in yesterday's press release and in the Company's most recent Annual Report on Form 10-K and the most recent quarterly report on Form 10-Q, which are on file with the SEC.

In addition, these forward-looking statements represent the Company's expectations only as of today. While the Company may elect to update these forward-looking statements, it specifically disclaims any obligation to do so. Any forward-looking statements should not be relied upon as representing the Company's estimates or views as of any date subsequent to today. Now, I will turn the call over to Gerry.

Thanks, Seth. Good morning, everyone and thank you for joining us on the call today. As in recent calls, I would like to start with an overview of the third quarter. Then I'll give a brief update on the progress we've been making against our strategic initiatives and some highlights on our business in the third quarter of 2014.

And finally, I'll provide our outlook for the fourth quarter. Following me, Seth will give further details of our financial results and then we will open the call to your questions. The third quarter was another strong one with sales of $187 million, which was up the high-end of our guidance, while non-GAAP earnings of $22.8 million (sic - see press release), or $0.43 per share, were also above our expectations.

Semiconductor sales, both with OEM and device manufacturers, continued to remain strong and sales through all [those markets] further increased sequentially, a reflection of the contribution from Granville-Phillips, as well as our continued emphasis on these adjacent markets. I am pleased with these results and anticipate continued strength as we exit the year. Seth will have more details on this quarter, as well as Q4, later in the call.

When they assumed the role in January, the team and I focused on strategic initiatives with specific goals to continue to broaden our leadership in vacuum processing, measurably improve our profitability throughout the cycle, efficiently deploy capital to increase shareholder value and aggressively pursue opportunities created by current technology inflections.

In the third quarter we made additional progress towards achieving these goals. Starting first with our goal to improve leadership in vacuum processing, we continue to integrate Granville-Phillips, or [GP], operationally and technically into MKS. Product lines have been combined and rationalized. Operations have been consolidated and the [union] has progressed very well.

The integration is effectively complete and GP is now fully part of MKS and has been immediately accretive. We are now the leading global provider in our served markets of indirect gauges. In addition, we estimate we remain number one overall in our core served markets and that we gained share organically in 2013.

Going forward we have additional initiatives to further broaden our technology leadership and continue to explore M and A opportunities that have a strategic fit with MKS. We have a robust M and A pipeline and I am confident that we will continually successfully identify, acquire and integrate other technology based companies.

We have remained dedicated to our goal to improve our profitability. And in the quarter we took certain additional actions to streamline activities and improve our (inaudible) execution, and with these changes are performing to our new model. Our goal is continued improvement in our profitability and we will monitor progress against our model and make adjustments to refine it as business conditions warrant.

In addition to our profitability goal, we are committed to returning capital to shareholders. In the third quarter we paid dividends of approximately $9 million. Since 2007, the combined return of capital from dividends and share buy backs totalled $379 million and, year-to-date, we have deployed nearly $135 million in capital through the acquisition of GP, shareholder dividends and share repurchase.

Technology leadership is a core aspect of our strategy. In the semiconductor market we continue to target opportunities arising from the significant technology changes facing the industry. The shift from [planer] to 3D device is progressing and device makers are integrating additional deposition, etch and process control steps in order to continue scaling while EUV remains slowed.

The complexities of (inaudible) films, high aspect (inaudible) ratio etch, [deep via] and atomic [layer] films continue to challenge the industry. MKS is well-positioned to provide solutions to address these challenges. For example, our industry-leading [RF] generators provide the position control required for the fine lines in high aspect ratio holes in leading-edge 2D and 3D devices.

And we continue to increase penetration with these new products. In the quarter, we also achieved design wins at two major etch OEMs for our Flow Ratio [pressure controller] products. Both of these technologies provide active delivery and precise control of processed gases, which are required for advanced etch.

We were also selected to provide process solutions [through] heat and control gas delivery and to manage effluent to ensure process consistency and productivity. We work closely with all OEMs across the globe. However, we have seen increasing demand coming from Asia as new OEMs emerge and production continues to shift east.

Over the past decade we have made significant investments to be near our OEM customers and device makers in this growing region. This is especially true in Korea where we have invested in regional offices, local applications engineering and repair capabilities, as well as acquiring Plasmart, our Korean product line, designing our (inaudible).

Our localization strategy continues to pay dividends as these investments have allowed us to develop relationships and provide solutions to OEMs in the region. And I am pleased to report that this quarter we received another significant design win, this time for a Revolution III remote RF plasma source for (inaudible) wafer processing.

This is a significant win with a growing Korean (inaudible) OEM, with two slated for advanced memory production. We anticipate that shipments will begin in the fourth quarter and continue into early 2015. Additionally in Korea we received the following orders for our [CBD] chamber clean, as well as flow, pressure, ozone, microwave and other products.

While Korea was a good example of how focusing resources improves results, we continue to work closely with all of our customers across the globe. For example, recently a major device manufacturer in North America selected our new LIQUOZON [re clean] system due to the significant savings it provided. In this quarter it was designated as parts of the process of records for future production.

Elsewhere this quarter, because of our superior performance, we received additional orders for our advanced residual gas analysis products which monitor conditions during physical vapor deposition and other critical processes. This is an especially important win since we once again displaced an incumbent supplier.

Here are just a few examples of recent activities and design wins. But they demonstrate how we support the semiconductor industry around the world and we are optimistic and excited about our future growth and the future of this exciting industry. Moving to our other advanced markets, sales increased for the fourth consecutive quarter.

These adjacent markets include medical, thin films, bio and pharmaceutical manufacturing, LEDs, flat panel displays and other diverse applications. In the past calls, I have spoke about the success of our multi (inaudible) software in the bio pharmaceutical market.

This quarter we saw an expansion of our real-time process (inaudible) software in another important and growing market, specialty chemical manufacturing. This win follows successful implementation of the product in the US with a customer quantified to value the software in improving their production process.

This customer has now started implementation at their other facilities outside of the US. We continue to have additional follow-on orders for many MKS products. For example, this quarter we received additional demand for pressure controller products used in advanced plasma sterilization for dental and medical instruments.

Additionally, we continue to gain acceptance to take share in the general industrial applications [with] our G-Series multi gas multi range mass flow controllers. I am pleased to report that this quarter we achieved a milestone of over 12,000 G-Series MFCs shipped to more than 650 customers, significant indication of the success we have seen with this design.

In the last call, I mentioned that we have identified several key mega trends which we are pursuing to drive future growth. One of these mega trends is environmental monitoring, which includes examining ambient air safety as well as quality.

I reported in the past calls that the AIRGARD has been installed in major government facilities with multiple follow-on orders projected. This quarter I am proud to report that we have made in-roads into the non-government sector as a major US municipal transportation system purchased AIRGARD detectors to monitor for hazards throughout their system.

This is the first major AIRGARD sale outside of core government activities and is part of our strategy to expand our sales in environmental monitoring. This win is significant in the potential opportunity it represents for MKS. But, above that, this success is validation of our capability to develop advanced solutions which can help protect the general public, which we expect will open future opportunities for MKS.

These are just a few examples of how our technologies are solving challenges in the many diverse and growing applications in markets we serve, which provide growth for MKS. Looking ahead to the fourth quarter, business in the [semi con] market remains solid and several major OEMs have recently placed large orders with shipments in the fourth quarter and into the first part of next year.

In our other markets, we continue to leverage our breadth of technologies as we strategically search out additional opportunities and we anticipate that (inaudible) will grow. Based on these factors, and looking at current business levels, we anticipate the sales in the fourth quarter may range from $185 million to $200 million.

At these volumes, our non-GAAP net earnings could range from $0.42 [to] $0.53 per share. At this point, I'll turn the call over to Seth to discuss our results and expand upon our guidance.

Thank you, Jerry. I'll first discuss the Q3 2014 results before providing further details on our Q4 2014 guidance. [Revenue] for the quarter was $187 million, increase of 1% compared to Q2 revenue of $185 million, an increase of 12% from $166 million a year-ago.

Our Q3 revenue [was at] the higher end of our guidance due to (inaudible) anticipated sales in the semiconductor [market and] continued growth in our other advanced markets, which were up 5% sequentially and over 17% from Q3 2013. Non-GAAP gross margin was 43.3%, which was slightly above our expectations at this sales volume primarily due to more favorable product mix.

On a GAAP basis our gross margin was 42.5% and included $1.6 million of amortization of the inventory step-up related to the GP acquisition. Non-GAAP operating expenses were $48.2 million, which was also favorable to our guidance range due to lower employee-related costs, the timing of R and D, IT and other project spending.

GAAP operating expenses were $51.2 million, [including] $1.8 million of amortization of intangible assets, as well as $1.2 million of restructuring charges. Our non-GAAP operating margin was 17.5% of sales, which remains ahead of our target model at these volumes.

Non-GAAP net earnings were $22.8 million, or $0.43, per share compared to $22.6 million in the second quarter and $13.3 million in the third quarter of 2013. Our non-GAAP tax rate was 31%, as expected. GAAP net income was $29.1 million or $0.55 per share, including GAAP net income with discrete tax credits totaling $9.5 million related to favorable settlements of both domestic and international tax audits, as well as a tax credit from an inter-company dividend from a foreign subsidiary.

As I mentioned before we are committed to making (inaudible) improvements in our financial performance over the operating cycle. In the first quarter earnings call, we discussed a reduction in workforce that is now substantially complete. In the third quarter we completed further reduction in workforce in our international operations.

That, along with other cost reduction activities, resulted in a $1.2 million restructuring charge. We anticipate reinvesting the annualized savings related to this Q3 activity into other high growth opportunities. To recap, the combined impact of the 2014 restructuring activities reduced our (inaudible) cost structure by close to $10 million on an annualized basis.

And we have what will be reinvesting almost $4 million of this back into key initiatives and functions to further strengthen our core competencies, the result of the net improvement in our long-term operating model while providing key funding and resources for long-term growth initiatives.

As we discussed in previous calls, these actions, in connection with other opportunities, have improved our target operating model throughout the semiconductor cycle. And our previous and current financial models are posted in the investor section of our website.

Now turning to the balance sheet. Cash and investments increased by $24 million in the quarter to $570 million or approximately $10.75 per share. The increase in cash and investments was due to continued strong cash flow from operations.

In the quarter we also made a dividend to shareholders of $8.8 million or $0.165 per share. At the end of Q3 approximately 53% of our cash investments were in the US and the balance are located throughout our international operations. Total book value, net of goodwill intangibles, was $817 million or $15.39 per share.

In terms of working capital, days sales outstanding were 52 days at the end of the third quarter compared to 50 days at the end of the second quarter. And inventory turns were 2.8 compared to 2.7 in the second quarter. Capital additions for the quarter were $2.1 million. Depreciation and amortization expenses were $5.8 million, and noncash stock compensation was $2.8 million.

The total deployment of capital for share repurchases, dividends and the acquisition of Granville-Phillips was nearly $135 million year-to-date, more than one-third of our cash balances in the US when we started the year. We have, therefore, deployed more than half of our excess cash in the US during 2014.

And we will continue seek ways to deploy capital in the (inaudible) long-term interest of our shareholders. Now I will go through more detail regarding the accomplishment of revenues for the third quarter. Sales to the semiconductor market were $126 million compared to $127 million in Q2 and represented 67% of third quarter revenue. Sales to semiconductor OEMs were $102 million, or 54% of total revenue.

And sales to semiconductor fabs were $24 million and comprised 13% of total sales. Both of these were comparable to last quarter. Sales in our other advanced markets were $61 million, up 5% from the second quarter of 2014 and up 17% from the third quarter of 2013.

This increase was the fourth consecutive quarterly increase of revenue in our other advanced markets and reflects the impact of a full quarter's revenue from GP. Sales of these markets comprised 33% of total revenue in the quarter and can vary from quarter to quarter, depending on specific products.

Geographically, sales in the US were 58% of total sales, sales in Asia were 31% and sales in Europe were 11% of total sales. Sales to our top ten customers represented 46% of total sales. Sales to Applied Materials and land research comprised 20% and 11% of third quarter sales respectively.

Our headcount at the end of the third quarter was 2,350 down from 2,421 at the end of the second quarter due to restructuring activities described earlier, the inclusion of temporary headcount additions related to seasonal summer help in the US and minor attrition of [our] direct labor workforce in China.

Now I'll turn to Q4 2014 guidance. Based upon current business levels, we estimate that our sales in the fourth quarter could range from $185 million to $200 million. Based upon this expected sales range our Q4 gross margin could range from 44% to 45%, reflecting these volumes and expected product mix.

Q4 non-GAAP operating expenses could range from $49 million to $50 million. In the fourth quarter R and D expenses could range from $16.1 million to $16.5 million. And SG and A expenses could range from $32.9 million to $33.5 million.

The range of operating expense in the fourth quarter reflects certain R and D and other project expenses that have moved from Q3 into Q4 and higher employee-related costs. As I mentioned in previous calls, the timing of [the] project expenses depends upon a variety of factors and could vary from quarter to quarter.

In the fourth quarter amortization and intangible assets is expected to be approximately $1.8 million and net interest income is estimated to be approximately $400,000. We expect our fourth quarter income tax rate to be approximately 31% reflecting (inaudible) geographical mix of taxable income.

Given these assumptions, fourth quarter non-GAAP net earnings could range from $22.3 million to $28.2 million, or $0.42 to $0.53 per share. And GAAP net income could range from $21 million to $27 million, or $0.39 to $0.50 per share, on approximately 53.5 million shares outstanding. This concludes our prepared remarks. I will now open the call for questions.

Thank you. (Operator Instructions). Our first question comes from Tom Diffely with D.A. Davidson. Your line is now open.

Yes. Good morning. Maybe first couple questions on just the business trends today. It sounds like, based on your comments, there were some nice orders placed for the fourth quarter going into the first quarter. So do you view this as kind of a multi quarter ramp in your business on the semiconductor side?

Well, you know, we -- thanks for the question by the way -- And part of the problem we have is our lead times are so short our visibility is relatively modest.

But if you -- if we look at what the range of growth in the equipment spending is supposed to be, [on] the average is 7%, and the shift to more favorable mix for MKS to 3D NAND and FinFET [and] multi patenting, it would tend to lead us to believe that yes, it would be something we'd expect to see continued growth. So we think it's a positive trend for us, yes.

Okay. And then the range of your guidance is based just on timing then of those projects?

Yes.

Whether they hit in the fourth quarter or first quarter?

Exactly.

Okay. Good. And then, Gerry, you talked a lot about Korea being a nice kind of a growth area for you, assuming your relationships with the local guys. What about China? We know we hear a lot of chatter, lately, about the Chinese government trying to support their own industry. Are you positioned there? Are you seeing any activity there?

Oh, yes. We -- we actually have had a large presence in China for some time, both operationally [in] sales and service. We continue to see significant growth in our Chinese operation. Actually second only, primarily, to Korea and we're very well-positioned with OEMs there across-the-board. Whether they be in -- primarily things like LED, (inaudible), it continues to bounce back. Semi as well.

So yes, our Chinese business is very strong and we have a good, solid operations over there. We're very happy with what's going on there. You know, we highlighted Korea because it's such a growth in the semiconductor equipment space there and, again, with the device makers.

But we certainly are just as focused in Taiwan. We've seen good growth there. China. Solid positioning in Japan. It just happens to be that Korea has really accelerated in its growth.

Are you getting the sense that the Chinese government is really trying to grow equipment companies or is it more on the design side?

Well we really don't have a lot of visibility into the Chinese government. Just the OEMs themselves. And on the equipment, it looks like that [what we're] seeing is a lot of really capable people in China now. Actually, some people that came from the equipment industry in the US and in Japan are now in China.

We have faith and confidence in these people. We've worked with them in the past. So they are very entrepreneurial. So if the government is assisting them they still have really strong people that know what they're doing. And we're please with that.

Okay. That sounds good. And, Seth, when you look at the $10 million per year savings or cost reduction that you have done, should we look at the model a little differently now? We are we moving some of those costs now from COGS and SG and A into R and D for the reinvestments?

Yes. I would say you're right, Tom. So $10 million -- the $6 million net savings on $10 million gross we're going to reinvest $4 million back in other areas. Most of that reinvestment will be in the R and D or really market based -- either sales, application (inaudible) or business development functions.

Yes. Not in manufacturing and certainly not in the [back ops] operations. So it's really targeted to really expand the opportunities we see in other advanced markets, even semi, as well.

Okay. And then, finally, Jerry, when you look at some of these air quality programs that you've talked about in the last few calls, what are kind of the relative size of these -- the opportunities for you per project and how many projects are there out there potentially?

Well, it really varies by application. You've got engine testing. You've got emissions stack monitoring. In this particular case, chemical weapon detection. I would probably say that the one with the biggest area of growth for us could be chemical weapon detection. And that business was relatively small by our standards but the growth potential is very significant.

So I really can't get into specific details of what each project could entail because there's still a lot of things we have to keep discreet. And we have to use discretion in discussing it because of the sensitivity of it but they could be very significant. I don't mean to be evasive but we just have to be careful what we say.

Yes. No, understood. Okay. Thank you.

You're welcome. Thanks a lot, Tom.

Thank you. Our next question comes from Josh Baribeau with Canaccord. Your line is now open.

Hi. Thanks. Did you guys ever think -- (inaudible). Can you share with us the ideal mix that you'd like between semi and, let's call it, the other markets?

Well, I'd like, during a peak, if we were more like [60, 40] or [55, 45] during a semi peak. Which means we really grow in the other advanced markets without turning our back on our semiconductor industry, which we think is a great place for our continued growth and strength.

But it would be nice to have in case there's some modifying cycle, we'd have a strong [basement] for our business by having grown the other advanced markets. So that'd be a nice mix. It may take us a while but I think that would be a great mix, if we could do that.

Okay.

And you're looking at things like industrial -- more in the industrial markets where it's more steady in terms of the business that we see. Those types of things.

Great. And then as you kind of look around at valuations across-the-board in a lot of sectors, as of the past couple weeks and months, has your appetite increased or has your [quoting] activity potentially increased for acquisitions with some of your potential targets maybe looking a little bit more attractive?

Well, I think what we're trying to do is keep a steady hand on our acquisition strategy. And I think what we'll do is we would pay a fair value for a company that we think is -- fits our model that's accretive, [if it] fits our -- our growth strategy and our markets. So we continue to look on a continuous basis.

I've got M and A team that we're looking throughout the world, being proactive rather than waiting for things to come to us. And we see things that are of a decent value. And if we think things are over valued then I'm not so sure we would act on them.

I think we paid a good price for GP but I think we think, based on the business growth and on the tax advantage of it, that it was a good deal. So I think we would be very careful and good stewards of the Company's money but make sure we [invested] for good, high-growth opportunities.

Great. That's it for me. Thanks for taking the question.

Thanks, Josh. Good to talk to you.

Thank you. And our next question comes from Patrick Ho with Stifel Nicolaus. Your line is now open.

Thank you very much. Gerry, can you give a little bit more color in terms of the strength in your semi business, particularly in Q3. It held up, it appears, better during this industry pause than a lot of your peers.

Can you comment whether it's the exposure to some of the key process segments that are increasing capital intensity like etch and deposition? Or were new design wins a contributor to, I guess, the better-than-expected performance?

Well, thank you Patrick for the question. I think it's actually a combination of all three. I think -- I think the shift in the technology is good for MKS and I think we're seeing great benefit from that. I think our position in Korea has helped us a lot.

We have got good business with Korean OEMs over there. And we've seen some significant orders coming our way. And I think -- I think that's helped a lot maybe compared to others.

And also the other thing is we're kind of first in line in the food chain, Patrick. So sometimes we'll call the downturn and people will think that we're kind of Debbie Downer because we say it first. But it's based on where we are. So I think a little bit of it is because we're so early on in the supply chain.

And I think there's some significant design wins, like the LIQUOZON, and other things that we got in our technology shifting to the 3D NAND and FinFET multi patenting. And I think our strength in Asia has contributed to all of that.

Great. That's helpful. Maybe going to the non-semi side for a second. Excluding the Granville-Phillips, what other markets are you seeing kind of emerging strength or building momentum, particularly as we head into the end of the year as well into 2015?

Are you seeing any more activity in some of your traditional markets, like flat panel display or LEDs? What are some of the other markets you're starting to see strengthen?

Yes. Well, the medical was -- was a nice business in the quarter, which is a nice part of our business. So we saw some strengthening there. The bio pharm is also [starting] to see some good strengthening there. And the LED, we talked about it being off life support.

We think maybe the patient is now taken its first step out of the hospital bed because we've seen a little better increase on the LED side as well. So I think those three markets kind of led a good strengthening for the Company, and we're well-positioned there. And those are places we are really trying to penetrate further.

Great.

And as well as the -- as well as the air quality, [air] safety emissions control.

Great. That's helpful. And the final question from me for Seth. In terms of the inventory levels, you guys did a pretty good job in Q3, especially as orders were building. How do you see that trending in Q4 and maybe even a little bit of color early parts of Q1 2015, given some of the comments by your customers?

Yes. I think, Patrick, what's going to drive inventory levels is really our sales guidance, I would say. So it'll move by a little bit but I wouldn't expect a major change in inventory volumes by the end of the fourth quarter.

And it more correlates with the revenue guidance we gave. If that were to move, obviously, that would probably drive inventory levels. And it can be a little lumpy sometimes. We don't instruct the teams in manufacturing to do anything that's unnatural. They'll do sort of the normal cadence on the [buys].

You might see a lumpiness there, which is better for them to really level [out] the factory and get the best pricing from the suppliers. But, I would say, it would be fairly consistent right now based on the guidance we gave and revenue in the fourth quarter.

Great. Thank you.

Thank you, Patrick.

You thank you, Patrick.

Thank you. (Operator Instructions). Our next question comes from Jairam Nathan with Sidoti. Your line is now open.

Hi. Thanks for taking my question. My first question was on the Korea wins. The significant end customer there seems to be having some trouble. So, in light of that, the -- would you kind of -- could the wins in Korea, are they mostly [memory] related where you are seeing more spending? Or can you give us some more idea [there]?

Well, I think that, generally, across-the-board. There are also multiple end-users there other than just one that people talk about, which we have strength with. And I think that -- that the Korean OEMs we work with are very close to the device makers, the end users.

And so I know -- I don't think that they would be strengthening their position with us if they were skittish about the long-term outlook for work with their end customers. I know these customers well and I know how they order. And I think they see confidence in the business going forward. And I think -- and I also think it's basically across-the-board.

Okay. Thank you. Just -- just more broadly on design wins. How long does it typically take once you win a design to kind of start seeing it in revenue?

Well, it really depends on -- on the individual OEM. Some can be a quarter or two out. Some might take -- might take 7 or 8 months out on the design cycle. So it really kind of -- really depends. And it depends on where their product is [in] their release cycle, too.

So it's really kind of hard to say. Some could be -- almost be immediately, as an immediate replacement. And we've seen that. And some could be a matter of their acceptance of their tool into the market and how they go from pilot to production release. So it really kind of varies.

Thanks. And my last question on -- You mentioned in your press release about redeploying resources, [refining] the cost structures. Do you see more opportunities on the efficiency front on OpEx?

I think that we're dedicated to continuing to look at the cost to run this business and where our money is being invested. And I think the thing that -- that you've seen us do in the last number of months, the last three quarters is to evaluate where we're spending and the return we're getting on it. I think -- I think MKS has always been seen as operationally excellent and financially prudent.

We don't expect to do that. But we do think that there's -- As we continue to look at the business that's growing, if we have to shift or reduce costs in order to strengthen investments elsewhere, we'll continue to do that. So it's something my team is continually looking at on a monthly basis. Absolutely.

Okay. Thank you.

You're welcome.

Thank you.

Thank you.

Thank you. And, at this time, I'm showing no further questions. I would like to turn the call back over to Gerry Colella for further remarks.

Thank you. This quarter was another strong quarter for us and I am very pleased about our performance. We have targeted specific goals and focused our actions to achieve them, and are now seeing the results. The fourth quarter has started strong with several semiconductor OEMs placing orders to satisfy the increasing capital intensity requirements facing the industry.

We continue to leverage our technologies into adjacent markets and to address mega trends such as air quality and safety. I am very optimistic about future opportunities and I look forward to updating you on our continued progress in January. Thank you for joining us on the call today.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a wonderful day.