萬機儀器 (MKSI) 2015 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the MKS Instruments second quarter 2015 earnings conference call. (Operator Instructions). I would now like to introduce your first speaker for today, Seth Bagshaw Chief Financial Officer. You have the floor, sir.

Thank you. Good morning, everyone. I'm Seth Bagshaw, Vice President, Chief Financial Officer. I am 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 second quarter of 2015. You can access this release at our website www.mksinstruments.com.

As a remainder the various remarks we 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 of various important factors including those discussed in yesterday's press release and the Company's most recent end report on form 10-K, most recent quarterly report in form 10-Q on file with the SEC.

In addition, these forward-looking statements should not represent the Company's expectations only as of today. While the company may elect to update these forward-looking statements, it simply 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 today.

Now I'll turn the call over to Gerry.

Thanks, Seth. Good morning, everyone, and thank you for joining us on the call today. In my prepared remarks I'll give an overview of the second quarter financial results, provide a brief update on our strategic initiatives, discuss some recent highlights and achievements in our various end markets and conclude with our outlook for the third quarter. I'll then turn the call over to Seth for his detailed review of our financial results, after which we'll open the call for your questions.

I'm pleased to report that our second quarter sales increased to $218 million at the high end our guidance, up 2% from last quarter and up 18% from the same quarter last year. Non-GAAP earnings were $31.1 million or $0.62 per share compared to $35.5 million in the first quarter.

In the semiconductor market we achieved another best in quarterly revenue at $154 million. These strong results reflect the technology inflection points that are particularly favorable to MKS, as well as the impact of a number of strategic investments we have made and are continuing to make.

Confirming the results of the team's hard work and customer focus in the last 18 months I am also proud to report that in 2014, MKS achieved 200 basis points of overall market share gain and 250 basis points within our power product groups and our served semi markets.

These strong gains reflect the continued emphasis we have placed on working closely with our customers to help solve complex problems with their technology road maps. Within our other advanced markets revenue increased sequentially for the seventh consecutive quarter. I'll provide additional examples of both design (inaudible) and new opportunities in some of these markets later in the call.

I've spoken in passed calls about our goal to broaden our leadership in our core adjacent markets. Today I'd like to talk a bit about some of the specific plans we are pursuing to further realize these goals. Several years ago we made a concerted effort to employ technical resources at the customer level to further penetrate the Korean market. The investments we made, including the acquisition of Plasmart, a highly respected and technically strong arch technology company, have been very successful.

As a result, our relationship with Korean customers, our understanding of their challenges and our ability to work closely with them to help solve complex problems have been further strengthened, so much so that the key note speaker at our recent analyst day was a Senior Technology Executive from Samsung who traveled from Seoul to New York to give a personal view of the many challenges facing a leading device manufacturer.

He talked about the complex complexion points they are addressing and outlined successful impact that MKS, with our local ability, has had to help solve these significant technical challenges. Validating opposition as an industry leader working closely with both our OEM and end user customers.

Due to this localization Korea has become the largest and fastest growing MKS subsidiary. We want to extend this localization approach and in this quarter we launched an initiative to evaluate our regional capabilities globally to ensure we have the best technical depth and level of infrastructure resident near our customers.

Our intention is to be closer to our customers so that we can solve problems together, in the end succeed together. It took several years to achieve the results we're seeing in Korea. We know that expanding this globally will take time but we are confident this program will yield long term success.

We are also working hard to continue to make the customer experience with MKS ever better. Our goal is to make customers interactions uniformly exceptional and to achieve this we are working on various elements of the customer interaction ranging from adopting best business practices, building product identity to early collaboration of the technology leader. We believe this will not only strengthen our performance in our core semiconductor market, but will also provide clarity as we focus on new adjacent markets where we are targeting growth.

These are just a few examples of the programs in place to achieve our goal of sustainable and profitable growth. These are in the early stages of development but we are progressing well and I'll provide further updates in our progress in future calls. Moving now to revenue performance in our core semiconductor market business, we had a good quarter and sales were $150 million, we're up 2% quarter over quarter and up 22% the same period a year ago.

We continue to aggressively pursue the opportunities created by current technology inflection points especially in (inaudible) deposition where MKS is at a strong position. This quarter we initiated several new product valuations and continued to receive (inaudible) orders for RF power, remote plasma, ozone, pressure, flow, and other products which support 3 D structures, multi-patenting and other technical challenges facing the industry.

This quarter we also received a number of orders in new design wins directly from semiconductor staffs, for example, at major Korean chip manufacturer we worked directly with them to use, to evaluate a newer more efficient and higher reliability chamber cleaning solution to replace an older MKS product. Engagement was successful and (inaudible) manufacturer has specified this new MKS solution as a process of record for all new tools.

Another major chip manufacturer was experiencing technical problems competitor's CVD camber cleaning solution. Our team worked with them to evaluate our new high performance Paragon remote plasma source which was able to cost effectively solve their problem.

As a result we displaced the competitor and this customer is now replacing their original product with the MKS Advance Paragon Solution for all their tools. These examples and many others illustrate how we are succeeding in the semiconductor market and, as I mentioned earlier, our continued success is reflected in quantifiable market share gains, as well.

In addition to expanding our leadership position in our core semiconductor market, MKS has a strategy of leveraging the breadth of our portfolio into other adjacent markets. These markets include industrial, environmental and safety monitoring, thin films, biopharmaceutical and pharmaceutical manufacturing, solar, flat panel displays and other diverse applications.

I'm proud to report that Q2 sales for these markets increased for the seventh consecutive quarter. You may have seen our press release in July 15th, where we announced a new sales channel to the industrial marketplace, an important market for our vacuum, flow and analytical products. We have entered into an agreement with a leading vacuum solutions provider to provide privately labeled and customized gauged products.

We are very pleased to have won this important business especially since we displaced an incumbent supplier. It is a great opportunity to work with one of the most respected companies in a general industrial vacuum market. Shipments are expected to begin later this year and this exciting opportunity expands our sales within the industrial markets, further supporting our growth strategy to organically increase sales to other advanced markets.

Moving to the environmental and safety monitoring market, we continued to expand the customer base for our AIRGARD Ambient Air Analyzers, which rapidly detects toxic gases. Our initial focus was on critical government facilities, we have expanded our target market to include the municipal and commercial applications such as transportation hubs and other public spaces where AIRGARD is gaining traction as well.

I am happy to report that this quarter AIRGARD has been selected by a second major transportation system to monitor the ambient air and provide detection and early warning for hazardous chemicals. Continuing in the environmental application, last quarter we announced the acquisition of Precisive LLC, an innvator of optical and analyzer technology. These precision analyzers are based on TFS to provide real-time gas analysis in the natural gas and hydrocarbon processing industries, anew but complementary environmental application.

This quarter we successfully completed the integration into MKS and, although still small spot on our revenue, we've begun to see increased order activity on these products. In many of our other markets, we saw follow on business. The revenue stream which is a reward of winning a design and a flat panel display market.

Mid to high end cell phones continue to see healthy growth and we have seen follow on sales of our ozone products, which are used to clean the displays between processing steps. This quarter we received orders from both Chinese and Taiwanese flat panel display makers for (dissolve) ozone as they increase production to support global phone demand. We continue to see growth opportunities in the coding market as well.

This quarter we received additional follow on orders for RF power and matching, as well as flow control for tools to provide waterproof coating of portable electronic devices. We also saw demand for floor products for energy efficient glass coatings as well as for hard coatings for wear resistance. Our G-Series MSCs continue to gain market acceptance in coating, as well as other industrial applications and to date we have shipped more than 20,000 units to more than 850 customers around the globe.

In the analytical market, we received a follow on order from the analytical instrument maker for RGAs (raditial) diagnostic functionality, improving precision and performance. As I said, continuous orders such as these are the reward (inaudible) design on a product and we continue to support and work with these existing customers as they develop new tools and applications which open future opportunities.

At this point I'd like to turn our outlook to the third quarter. Reports for the recent SEMICON trade show indicate a continued healthy market for semiconductor production equipment to support the technology inflections being addressed. Our near term visibility indicates a continued positive business environment in both our semiconductor and other advanced markets for the third quarter.

Based on these factors, and looking at current business levels, we anticipate that sales in the third quarter may range from $195 million to $215 million. At these volumes our non-GAAP net earnings could range $0.50 to $0.64 per share. At this point, I'll turn the call over to Seth to discuss our financial results and expand on our guidance

Thank you, Gerry I'll first discuss our Q2 2015 financial results before providing further details on Q3 2015 guidance.

Revenue for the quarter was $218 million, an increase of 2% compared to Q1 revenue of $214 million and an increase of 18% from $185 million a year ago. Our Q2 revenue was the higher end of our guidance range due to better than anticipated sales in the semiconductor market and continued growth in our other advanced markets.

Our non-GAAP gross margin was 44.4% and was impacted by unfavorable product mix. Our GAAP gross margin was 45.3%, included a gain of $2.1 million from the sale of inventory previously reduced as net realizable value. Non-GAAP operating expenses were $50.8 million, which is slightly above our guidance range primarily due to the timing of research and development project spending which can vary from quarter to quarter.

GAAP operating expenses were $52.8 million, included $1.7 million of amortization tangible assets and $200,000 of restructuring costs. Restructuring costs related to the strategic outsourcing of a select manufacturing operation in China recently completed in the second quarter. This will allow us to both improve our long-term cost structure and provide additional manufacturing flexibility.

Our non-GAAP operating margin was 21% of sales which is in line with our updated 2015 target model at these sales volumes. Non-GAAP net earnings were $33.1 million plus $0.62 per share compared to $35.5 million in the first quarter and $22.6 million in the second quarter of 2014.

Our non-GAAP tax rate was 29%, as expected. GAAP net income was $33.2 million or $0.62 per share. As we discussed in previous calls, we're very focused on achieving continuous improvements in our operating model. The impact of these improvements is clearly reflected in our continued strong financial performance.

At our analyst day on June third, we presented an updated and improved 2015 operating model, which at today's business levels will generate an additional 9% improvement in non-GAAP earnings per share as compared to our model entering 2015 and a 45% improvement in non-GAAP earnings per share at equivalent (inaudible) levels, including the Granville-Phillips acquisition since 2013.

It's important to note that this positive trend in our operating model also incorporates significant investments in many areas, which have a long term positive impact on sustained and profitable growth.

Now turning to the balance sheet. Cash investments increased by $24 million in the quarter to $613 million, approximately $11.48 per share. We maintain a strong focus on capital deployment and in May we increased our second quarter dividend by 3% to $0.17 per share. This was a third increase since we initiated the dividend in 2011 for total increase of 13%. Also in the quarter we repurchased 116,000 shares or $4.3 million or $0.3755 per share.

At the end of Q2, we had $158 million remaining on our share repurchase authorization. The timing and quantity of any shares repurchased will depend upon a variety of factors, including business conditions, stock market conditions, and business development activities, including but not limited to merger and acquisition opportunities. These repurchases may be commenced suspended or discontinued at any time without prior notice.

At the end of the second quarter, 52% of our cash and investments were in the US and the balance were located throughout our international operations. Total book value, net of good will and tangibles was $881 million or $16.52 per share. In terms of working capital, today's sales outstanding, were 52 days at the end of the second quarter compared to 53 days at the end of the first quarter and inventory turns were 2.9 compared to 2.8 in the first quarter.

Capital additions for the quarter were $2.8 million, depreciation and amortization expenses were $5.6 million, and noncash stock compensation was $3.6 million. Now I'll go through more detail regarding the composition of revenue for the second quarter.

Sales in the semiconductor market achieved a new quarterly record of $154 million, an increase of 2% compared to $151 million in Q1 and represented 71% of second quarter revenue. Sales of semiconductor OEMs increased 4% sequentially and were $125 million or 58% of total revenue. In sales the semiconductor fabs were $29 million a decrease of 5% compared to the first quarter and comprised 13% of total sales. Sales of semiconductor fabs tend to be more project based and quarterly you may vary quarter to quarter.

Sales to other advanced markets were $64 million, up 2% from the first quarter of 2015 and up 10% from the second quarter of 2014. This increase was the seventh consecutive quarterly increase in revenue in our other advanced markets, driven this quarter by an uptick in solar shipments.

Sales to our other advanced markets comprised 29% of total revenue in the quarter and can vary from quarter to quarter, particularly within the solar and other thin skin related markets based on the timing of specific projects and customer projects. Geographically, sales in the U.S. were 57% of total sales. Sales in Asia were 34% and sales in Europe were 9% of total sales.

Sales to our top ten customers represented 49% of total sales, sales to applied materials and land research comprised 18% and 13% of second quarter sales respectively. Our head count at the end of the second quarter was 2,343, down from 2,445 at the end of the first quarter primarily due to outsourcing of select manufacturing operation in China, discussed above.

Now I'll turn to Q3 2015 guidance. Based upon current business levels, we estimate that our sales in third quarter will range from $195 million to $215 million.

Based upon this expected sales range, gross margins can range from 44.5% to 45.5% reflecting these volumes and expected product mix. Q3 non-GAAP operating expenses could range from $49.5 million to $50.5 million. In the third quarter R&D expenses could range from $17.1 million to $17.5 million. And SG&A expenses could range from $32.4 million to $33 million. As I mentioned in previous calls, a ton of R&D and IT product based expenses depend upon a variety of factors and could vary from quarter to quarter.

In the third quarter, amortization and tangible assets expected to be approximately $1.7 million and net interest income estimated to be approximately $700,000. We expect our third quarter income tax rate to be approximately 29% reflecting just geographical mix of taxable income. Given these assumptions, third quarter non-GAAP net earnings could range from $26.9 million to $34.2 million or $0.50 to $0.64 per share and GAAP net income could range from $25.7 million to $32.9 million or $0.48 to $0.61 per share on approximately 53.6 million shares outstanding. This concludes our prepared remarks. We'll now open the call for questions.

(Operator Instructions). Our first question for the day comes from the line of Krish Sankar from Bank of America. Your line is open?

Yes, hi. Thanks for taking my questions, I have two quick ones. Either Seth or Gerry, on the September quarter guidance is it fair to assume your semi sales will be down in the high single digits or is that way off?

No, I think that sounds about right, Krish. We don't give guidance by other markets but you assume at the mid point of guidance, that the other advanced markets are relatively consistent, that would imply a downward in semi market by 8%. Now, also just so you know in Q2, the semi market was very strong for us. So quarter over quarter you have a lot of variation based on customer pull patterns, the manufacturing location. So to us it's not a substantial difference in the business.

Yes, it really just becomes a matter of people's inventory positioning and their build schedules, we got a lot of stuff that are on pull systems and combine. So it's not unusual to see slight variations quarter over quarter. We had a couple strong quarters in a row and we expect to see continued healthy environment and maybe small (protibation) this quarter. Nothing that is a concern at all.

Got it. And then in the June quarter, can you just tell us how the semiconductor shipment leanality was and how much was GP, was it around $3 million? Is a fair assumption? Thank you.

Let me find our GP.

It was pretty linear. We have a tendency, you know, people at the end of a month or end of a quarter, just the way they pull inventory, Krish, have a tendency to have a little bit of an uptick. But it's a typical pattern that we've seen for a long tame. Nothing seemed to be unusual from what we could see.

Yes. In this quarter GP was about $4 million of the semi revenue.

Got it. Thanks.

Thank you.

Thank you. Our next question comes from the line of Jairam Nathan from Sidoti. Your line is open.

Hi thanks for taking my question. Just, if you could expand on your strategy to kind of localize your efforts, does that involve more hard assets or is it, you know, more a certain service kind of, what's the plan there?

Yes. Sure. So, you know, in the past, you know, we that we saw Korea as a growing equipment base and we had already had a large presence there in service and sales. And then, obviously, we did the acquisition of Plasmart, which has turned out to be a great acquisition in terms of technology leaders, well connected in the space.

And so, as an example, we think there's an opportunity to expand Match Works business in the United States, which is a lot of what Plasmart does but in Korea. And so we took a couple of openings that we had and converted them, existing openings, into applications and engineering people on the west coast to look at Match Works capability and sales for Plasmart.. Once we felt comfortable that we had integrated them well, they were working very well with local Korean OEMs and end users, we said great, we can start to expand their capability in the US. And we're just taking a look at the same perspective globally, perhaps in Japan and non-semi markets but what we will do is look at existing resources and reshuffle the deck.

We're kind of looking at a zero based inventory in terms of our people or a zero based budget in terms of our people globally and saying are there better places for assets, either different assets or a different position around the world. So I don't think you'll see anything substantial impacting the financials of the company.

I think we're just looking for better way to utilize the technical talent or different talent than we have today. And we've seen the results of doing that in Korea and we think there's other places in the world we can do that.

Yes, thanks. And just one more on adjacent markets. Now, I kind of think about organic growth year over year, it probably was in that 5% range. And so, given the new initiative or, you know, at least success in new channels, how should we think about in the adjacent markets going forward longer term?

Jairam, we kind of look at it, kind of, a 2X GDP long term growth rate and I think if you look in the last several years, even organically we tend to overachieve that. I mean, from 2003, in the last ten years, it's grown about 8% to 10% AGR so I think long term it'd be 2X GDP.

Okay.

Short term goal's a little higher, obviously, that's how we look at it, kind of long term growth rate in those markets.

Great. Thank you. That's all I have.

Okay. Thank you.

Thank you. Our next question comes from the line of Tom Diffely from D.A. Davidson. Your line is open.

Yes, good morning. I guess, first question on the share gains, you talked about 200 basis points improvement over the last year. Are those share gains from, kind of, direct head to head competitions or is it you're exposed to some of these faster growing end markets?

It's probably a combination of both. You know, in some of these faster growing end markets we have head to head competition which we're winning in so it's actually, I think, just a combination of both. I mean, there are some places where we're displacing competitors in other markets outside of the fastest growing market. So it's a combination of all three.

Okay. And then I guess based on the fact that you're very well positioned, you know, with (inaudible) and the segments they have that are growing over the next few years you would expect this trend to continue?

We would. We are grateful to our customers for the opportunity they're providing to us. We need to remain cost competitive in high technology providers, which we believe we are, as validated by external speakers on our behalf. But, yes, we would expect that, as long as we continue to serve our customers well and are cost competitive and provide the same level technology we have and more than then we expect to see that upward momentum to the right with these customers. But we have to earn it every day.

Sure. And have you seen signs that these customers are decreasing or consolidating their supply base?

Well, we've read about it. You know, we've read about it. I will tell you there have been some discussions, I won't tell you with who, about things like exclusivity for us in some high growth areas which is an interesting conversation. You know, we hear those things now and then. But, yeah, I think so.

Okay. And then similarly, when you look at the Korean market and your increased presence there. Does that manifest itself in, you know, better direct sales to them or is there a pull-threw through the OEMs that you see with your equipment?

Well, we work directly with a lot of high profile Korean OEMs who serve the end users. So what we're see is a combination of a strong relationship with the end users, as evidenced by our key note speaker at our analyst day and you can look on the web to see who that was.

Plus that strong position with those Korean OEMs who are serving that market, in addition to the work that our OEMs, you know, in US and in Japan are providing Korea. So it's a multifaceted approach and we're very fortunate that all three strategies are working quite well.

Okay, so a lot of that is with the local OEM supplier base? The equipment companies that are base in Korea?

Yes a fair amount of it. We've won a lot of business on Korean OEMs who are supplying directly to the end users there. That's correct.

Okay. And then moving over to the industrial vacuum, the new partner you announced. Is there a reason you can't name who that partner is? Is it going to be private labeled under their product line?

It is private labeled. And, you know, they just asked us to respect their right to privacy. You know, over time, I'm sure we'll be able to come out and say who it is, but we're in the beginning stages of our relationship. The thing that's nice about it is we're starting on the gauging side but the opportunities are really wide and deep.

And once we prove ourselves on the gauging side as a viable supplier, which I know we will because that's our strength, then we're going it talk about an expanded portfolio offering and at some point in time, when they feel comfortable and we feel comfortable, we'll most likely say who the customer is. You would recognize them immediately. They're well respected. But they just prefer that we just keep it quiet for the time being.

Okay.

I'd love to tell you who they are. It would be great if we could tell you

Yes, okay. And then finally, I guess, Seth, when you look at the quarterly variability, is there really any seasonality left in this business or is it really just driven by the large technology projects that are out there?

Yes, Tom, I think it's more the latter. I mean if there is seasonality it's hard to see at our levels. I would say no. I'm sure there might be a little bit of it but fundamentally it's really driven by timing of customer projects and that quarter to quarter. But that's the biggest driver.

Okay. Thanks for your time.

Yes. Thanks.

Thank you.

Thank you. Our next question comes from the line of Patrick Ho from Stifel Nicholas. Your line is open.

Thank you very much. Gerry, maybe, first on the semiconductor side of things, given your strong results in the June quarter and the sustainability in September, did you see any kind of pull ins or, you know, given the upside for the June quarter what, kind of, drove it, was that kind of a building momentum as the June quarter progressed or did you see pull ins, given some of the CapEx spending trends that are out there right now?

Yeah. You know, it went along pretty much as planned, Patrick, there was little surprise to the upside, kind of towards the end of the quarter. And from what we've seen it's really just, you know, from my level, what we see, it's more like, just the way people consume inventory in their ordering pattern. We have a unique blend of customers.

We have some customers that we're on pull systems with them, so it's booking and shipping immediately and some have a tendency to accelerate the pulls for some reason. We have other customers that are traditional place of P.O. and quote them the material and they have a tendency to buy in bulk at one time. It's just the way the materials management systems are handled.

But it wasn't, you know, pretty much an unusual trend, other than the fact that it was a little bit of a surprise to the upside for us, which is great and typically it's because people just, at the end of a month, have a tendency that's the way they do their materials planning. But nothing that I can see is some trend of any kind. It's just seemed fairly healthy still.

Great. Now, maybe moving to the adjacent market, you mentioned solar as being a driver against the June quarter growth. What are some of the market trends that we should look at for that segment in the September quarter?

Well, it's pretty lumpy, I'll tell you that. I respectively would see some additional opportunities there. But it's really project based and the ordering pattern's a little bit awkward. So it's just lumpy, Patrick. And I'm not trying to be evasive, it's not like a steady state business we see with some of the other markets. It just comes in batches.

And, you know, fortunately for us, one of the things we've been able to do, is we've reduced the lead time on all the products that go to solar. That's the good news, that means we can take business from other people. The bad news is people wait until the last minute to order this stuff so it give us, you know, muted visibility.

I mean, the good news is we're well positioned with these customers but they tend to drop in large P.O.s and large shipments, that being multi million dollars type dynamics. And, I think, the opportunity going forwards is pretty lumpy. Hard it say in Q3 at this point.

Great. And final question, maybe for Seth in terms of the operating model. Given the strength that you're seeing in semis this year, the upside you've already posted, you've done a lot to streamline and enhance the business model. How should we had look at it going forward? Are there the possibilities that you may need to increase work force, the supply chain, given some of this upside stream, particularly as we go into 2016, how do you manage, I guess, or balance the needs of growing the business versus maintaining the model that you listed a few times already over the last 18 months?

Yes. Sure. Okay. So, we've mentioned on previous calls, of the cost that (inaudible) made in 2014, we are reinvesting about $5 million to $6 million back into the business high growth areas. That's not always volume dependent. I call those investments to really service customers in semi market and other adjacent markets. And those cost of fully (inaudible) that we're operation on right now. So, I feel very comfortable, those investments are well, you know, well in the run rate and kind of well in the model going forward. So that's really good. If any volume uptick above current levels, typically we'll see just more direct labor and we have a loot of leverage in the manufacturing arena. We have a little more capacity that we can absorb from.

I really wouldn't think an uptick on our revenue is gonna generate, really, any real change to the model. I would expect our variable growth margins to still romaine around 50% plus or minus five points. As we run the path it should continue through 2016. And we've said in the past too, is we have been working hard on our 2016 model and typically we don't update the model until we get to a point we feel very comfortable with it. And so the model we just updated last month is in place for the rest of this year but we are working on opportunities going forward as well. It's always a cage we have here within the company.

I would like it amplify another area, Patrick. You know, one of the reasons we made significant improvement to our operating model is this team that we put in place well over 18 months ago, called the Profit and Cash Recovery Team, and I continue to have that team meet every single month and we will continue to meet on a monthly basis. And what we're looking at is all elements of business of cost and are there ways we can improve, such an example, I was asked about, you know, this localization project we're looking at.

My expectation is I will relook at the resources we have and can they be applied in different way. So grow the business without adding the resources, just attacking it differently and on the Profit and Cast Recovery Team those are things we talked about, but we think there's still opportunity to focus on other costs in the company that we can reduce to continue to support the model or improve the model going forward. And that Profit and Cash Recovery Team stays in place, as far as I'm concerned, under my administration forever.

Great. Thanks again.

Okay, Patrick.

Take care.

Thank you. Our next question comes from the line of James Covello from Goldman Sachs. Your line is open.

Hi. This is Chelsea Jurman on behalf of Jim, Thanks for letting me ask the question. You mentioned 250 basis points in RF product share gain in 2014. Can you talk more about what areas you're gaining share in within that market and where you think that market share level can go?

Well, you know, I think, you know, we've got leading technology in pulsing capability, our pulsing capability, which is key to this whole 3D NAND and multipatenting progression. So etch and depth and 3D NAND we've seen as nice area growth up to the pulsing capability of our power generators.

Sure. And then it seems like some industrial companies have been reporting leak results. So can you talk a little bit more about what the different end markets are within your advanced markets group and if you're seeing a slow down in any of those segments.

Well, yeah, I think that, you know, it varies, you know, from market to market. You know, we see a nice opportunity in analytical instruments. So I don't know if we've seen any particularly significant weakness, maybe leveling in some markets.

But overall the overall is pretty consistent. And, you know, again, we said the solar part of it is rather lumpy which gets lumped into the advanced market. So it's pretty steady, for the most part.

Great. Thank you.

Thank you. That's all the questions I have in the queue for today so I'd like to turn the call back over to management for closing remarks.

Thank you. Well, I'm proud of our operating model and our record performance again this quarter and year to date. Increases in market share, validate our position as a technology leader and our advanced products enable the semiconductor industry to address the technology inflections they face. We will continue to invest in our leadership and execute on our strategies. We see many exciting opportunities for continued profitable growth both in semiconductor and other advanced markets we serve. Thank you for joining us on the call today.

Ladies and gentlemen, thank you again for your participation in today's conference. This now concludes the program and you may all disconnect your telephone lines. Everyone have a great day.