萬機儀器 (MKSI) 2023 Q3 法說會逐字稿

Good day, and thank you for standing by. Welcome to the MKS Instruments Third Quarter 2023 Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded.

美好的一天，感謝您的支持。歡迎參加 MKS Instruments 2023 年第三季財報電話會議。 （操作員指示）請注意，今天的會議正在錄製中。

I would now like to hand the conference over to your first speaker today, David Ryzhik.

現在我想將會議交給今天的第一位發言人 David Ryzhik。

Good morning, everyone. I am David Ryzhik, Vice President of Investor Relations, and I'm joined this morning by John Lee, President and Chief Executive Officer; and Seth Bagshaw, Executive Vice President and Chief Financial Officer.

大家，早安。我是投資者關係副總裁 David Ryzhik，今天早上與我一起出席的還有總裁兼執行長 John Lee；以及執行副總裁兼財務長 Seth Bagshaw。

Yesterday after market close, we released our financial results for the third quarter of 2023, which are posted to our investor website at investor.mks.com.

昨天收盤後，我們發布了 2023 年第三季的財務業績，該業績已發佈在我們的投資者網站 Investor.mks.com 上。

As a reminder, various remarks about future expectations, plans and prospects for MKS comprise forward-looking statements. Actual results may differ materially as a result of various important factors, including those discussed in yesterday's press release and in our annual report on Form 10-K for the year ended December 31, 2022. These statements represent the company's expectations only as of today and should not be relied upon as representing the company's estimates or views as of any date subsequent to today. And the company disclaims any obligation to update these statements.

謹此提醒，有關 MKS 未來預期、計劃和前景的各種言論均構成前瞻性陳述。由於各種重要因素的影響，實際結果可能會存在重大差異，包括昨天的新聞稿和我們截至2022 年12 月31 日的年度10-K 表格年度報告中討論的因素。這些陳述僅代表公司截至今天的預期，不應將其視為代表公司截至今日之後任何日期的估計或觀點。該公司不承擔任何更新這些聲明的義務。

During the call, we will be discussing various financial measures. Unless otherwise noted, all references to combined company financial measures reflect the combined results of MKS and Atotech Ltd, which MKS acquired on August 17, 2022. Also, unless otherwise noted, all income statement-related financial measures will be non-GAAP, other than revenue. Please refer to our press release and the presentation materials posted to our investor website for information regarding our combined company results, non-GAAP financial results and the reconciliation of our GAAP and non-GAAP financial measures. For a detailed breakout of reported and combined company revenues by end market and division, please visit our investor website.

在電話會議期間，我們將討論各種財務措施。除非另有說明，否則所有對合併公司財務指標的引用均反映MKS 和Atotech Ltd（MKS 於2022 年8 月17 日收購）的合併業績。此外，除非另有說明，所有與損益表相關的財務指標均將採用非GAAP、其他財務指標。比收入。請參閱我們的新聞稿和發佈在我們投資者網站上的簡報資料，以了解有關我們的合併公司績效、非公認會計準則財務表現以及我們的公認會計準則和非公認會計準則財務指標的調節的資訊。有關按終端市場和部門劃分的報告和合併公司收入的詳細明細，請造訪我們的投資者網站。

Now I'll turn the call over to John.

現在我將把電話轉給約翰。

Thanks, David. Good morning, everyone, and thank you for joining us today. Before I discuss our third quarter results and key business trends, I'd like to touch on the devastating violence that has occurred in the Middle East over the past month.

謝謝，大衛。大家早安，感謝您今天加入我們。在討論我們第三季的業績和主要業務趨勢之前，我想先談談過去一個月中東發生的毀滅性暴力事件。

There are simply no words that can describe the events that have unfolded, and our primary concern is the health and safety of our employees and their families in the region. As some of you may know, MKS has 3 facilities in Israel that manufacture some of our controls, optics and photonics solutions, which all remain operational. The dedication and resilience of our Israeli team is unmatched, and we hope for a return to peace quickly.

根本無法用言語來描述所發生的事件，我們最關心的是該地區員工及其家人的健康和安全。你們有些人可能知道，MKS 在以色列擁有 3 家工廠，生產我們的一些控制、光學和光子解決方案，這些工廠都仍在運作。我們以色列團隊的奉獻精神和韌性是無與倫比的，我們希望盡快恢復和平。

Turning to our third quarter results. MKS delivered strong profitability despite continued softness in end market demand. We reported revenue of $932 million, adjusted EBITDA of $235 million, and net earnings per diluted share of $1.46.

轉向我們第三季的業績。儘管終端市場需求持續疲軟，MKS 仍實現了強勁的獲利能力。我們公佈的收入為 9.32 億美元，調整後 EBITDA 為 2.35 億美元，攤薄後每股淨利潤為 1.46 美元。

Revenue from our semiconductor market was in line with our expectations as the cyclical downturn in industry memory spending continued. As expected, demand for our critical vacuum subsystems for deposition and etch remained muted. However, demand for our photonic solutions for lithography, metrology and inspection continues to be resilient.

由於產業記憶體支出持續週期性下滑，半導體市場的收入符合我們的預期。正如預期的那樣，對沉積和蝕刻的關鍵真空子系統的需求仍然低迷。然而，對我們的光刻、計量和檢測光子解決方案的需求仍然強勁。

Looking to the fourth quarter, we expect revenue from our semiconductor market to decline sequentially due to the continued weakness in industry memory spending, particularly for NAND, which is at a historically low level and where leading-edge tools contain relatively more MKS content. We also expect continued inventory work downs at key customers as they adjust to current demand.

展望第四季度，由於產業記憶體支出持續疲軟，我們預期半導體市場營收將季減，特別是NAND，其處於歷史低位，且領先工具包含相對較多的MKS內容。我們也預計，隨著主要客戶適應當前需求，他們的庫存將繼續減少。

The semi market will have its cycles, but the secular growth drivers over the long term are quite clear. The connected world will need more semiconductors with enhanced capabilities, creating the need for miniaturization and increased complexity. MKS is actively engaged with customers across a broad range of technology inflections. Examples include next-generation power solutions for advanced etch applications, optical subsystems for lithography, metrology and inspection. And precision motion for advanced bonding processes that enable applications such as high-bandwidth memory.

半成品市場將有其週期，但長期的長期成長動力是相當明顯的。互聯世界將需要更多具有增強功能的半導體，從而產生對小型化和更高複雜性的需求。 MKS 在廣泛的技術變化領域積極與客戶合作。例如用於先進蝕刻應用的下一代電源解決方案、用於光刻、計量和檢測的光學子系統。以及用於高級鍵合製程的精密運動，可實現高頻寬記憶體等應用。

We pride ourselves on investing during a downturn to position us to be even stronger in the next upturn. That is the exact playbook we have deployed over the past 60-plus years, enabling us to become a foundational supplier to the semiconductor industry with #1 or #2 segment share across more categories of critical subsystems than anyone else in the industry.

我們為在經濟低迷時期進行投資而感到自豪，以使我們在下一次經濟復甦時變得更加強大。這正是我們在過去60 多年中部署的策略，使我們能夠成為半導體行業的基礎供應商，在更多類別的關鍵子系統中佔據第一或第二的細分市場份額，比業內其他任何公司都領先。

Turning to our Electronics & Packaging market. Revenue grew sequentially and slightly better than expected due to normal seasonality associated with the consumer electronics market as well as slightly higher PCB and package substrate production ahead of the Golden Week holidays in Asia in the beginning of the fourth quarter.

轉向我們的電子和包裝市場。由於消費電子市場的正常季節性以及第四季度初亞洲黃金周假期前 PCB 和封裝基板產量略有增加，收入環比增長並略好於預期。

I'm pleased to announce that we also shipped a number of HDI laser systems to the low Earth orbit, or LEO, satellite communications space. We are the process tool record from multiple customers serving the LEO space due to the unique capabilities of our proprietary HDI via drilling technology which enables increased productivity for one of the industry's fast-emerging applications. This is a validation of our technology leadership and our unique ability to solve the hardest problems, establishing us as a key supplier to the leading PCB manufacturers.

我很高興地宣布，我們也向近地軌道（LEO）衛星通訊空間運送了一些 HDI 雷射系統。由於我們專有的 HDI 透過鑽孔技術的獨特功能，我們的加工工具記錄是服務於 LEO 空間的多個客戶的記錄，該技術能夠提高行業快速新興應用之一的生產力。這是對我們技術領先地位和解決最棘手問題的獨特能力的驗證，使我們成為領先 PCB 製造商的主要供應商。

In addition, we also deliver our proprietary chemistry and plating equipment to this market, which highlights opportunities for an integrated approach.

此外，我們還向該市場提供專有的化學和電鍍設備，這凸顯了整合方法的機會。

Looking to the fourth quarter, we expect revenue from our Electronics & Packaging market to be down sequentially, primarily due to seasonally softer chemistry utilization as well as the lumpy nature of our equipment sales. We are seeing some signs of stabilization in the PC and smartphone markets. Within the server market, there is continued strength in the package substrate market for AI applications, but this is more than offset by broader softness in non-AI server applications.

展望第四季度，我們預期電子和包裝市場的營收將環比下降，這主要是由於化學品利用率季節性疲軟以及設備銷售的波動性。我們看到個人電腦和智慧型手機市場出現了一些穩定的跡象。在伺服器市場中，人工智慧應用的封裝基板市場持續強勁，但這被非人工智慧伺服器應用中更廣泛的疲軟所抵消。

Turning to our specialty industrial market. Revenue was slightly below our expectations. Overall the business was favorable across our markets, but we saw some modest weakness in solar and LED applications.

轉向我們的專業工業市場。收入略低於我們的預期。總體而言，我們整個市場的業務表現良好，但我們發現太陽能和 LED 應用領域存在一些小幅疲軟。

We leveraged our expertise in R&D investments in our semiconductor and Electronics & Packaging markets to drive opportunities in our specialty industrial market. One example is the investment we have made in laser technology for advanced micro-machining applications, where we see portability into specialty industrial applications such as solar and life and health sciences.

我們利用我們在半導體和電子與包裝市場的研發投資方面的專業知識來推動我們的專業工業市場的機會。一個例子是我們對用於先進微加工應用的雷射技術的投資，我們看到了雷射技術可移植到太陽能、生命和健康科學等專業工業應用中。

Looking to the fourth quarter, we expect revenue from our specialty industrial market to be slightly down compared to third quarter levels. While demand across our end markets remains cyclically muted, we are highly engaged with customers and believe we are well positioned for the upturn.

展望第四季度，我們預期特種工業市場的營收將比第三季的水準略有下降。儘管我們終端市場的需求仍然週期性低迷，但我們與客戶保持高度互動，並相信我們已為經濟改善做好了準備。

I'm proud of how our team continues to execute and deliver timely solutions for our customers while pursuing operational efficiency through tight management of discretionary costs. We have a long history of prudent cost control and financial stewardship of our business throughout various market conditions, and today is no exception.

我為我們的團隊如何繼續為客戶執行和提供及時的解決方案，同時透過嚴格管理可自由支配成本來追求營運效率而感到自豪。在各種市場條件下，我們都有審慎的成本控制和業務財務管理的悠久歷史，今天也不例外。

Many of you on the call are familiar with a multi-decade secular growth story of the semiconductor market. We have been and will continue to be foundational to that market. However, electronic devices of today and the future will need more than just semiconductor transistor scaling as we move into an era of multichip packaging or systems scaling. MKS is uniquely positioned to enable this new era of scaling with the broadest portfolio of critical technologies across equipment, chemistry and services.

與會的許多人都熟悉半導體市場數十年的長期成長故事。我們一直並將繼續成為該市場的基礎。然而，隨著我們進入多晶片封裝或系統縮放時代，今天和未來的電子設備將需要的不僅僅是半導體電晶體縮放。 MKS 具有獨特的優勢，能夠透過設備、化學和服務領域最廣泛的關鍵技術組合來實現規模化的新時代。

And now I'd like to turn the call over to Seth.

現在我想把電話轉給塞斯。

Thank you, John. Before I cover our third quarter results, provide details on outlook for the fourth quarter, I want to echo John's comments regarding our concern for the health and welfare of our employees in Israel. We are amazed at the dedication and fortitude of our Israeli team as they operate in extremely difficult circumstances. Just a point of reference, revenue from our manufacturing operations in Israel in the last 12 months represented approximately 7% of our total revenue.

謝謝你，約翰。在我介紹第三季業績、提供第四季度前景的詳細資訊之前，我想回應約翰關於我們對以色列員工健康和福利的擔憂的評論。我們對以色列團隊在極其困難的條件下運作的奉獻精神和毅力感到驚訝。僅供參考，過去 12 個月我們在以色列的製造業務的收入約占我們總收入的 7%。

Turning to our third quarter results. We delivered revenue of $932 million, just above the midpoint of our guidance. As expected, substantially, all the remaining revenue impacted by the ransomware in the first quarter, which is estimated at approximately $30 million. After excluding the impact of the ransomware incident recovery from the second and third quarters, our revenue grew slightly on a sequential basis.

轉向我們第三季的業績。我們實現了 9.32 億美元的收入，略高於我們指導的中點。正如預期的那樣，第一季所有剩餘收入均受到勒索軟體的影響，預計約為 3000 萬美元。在排除勒索軟體事件復原的影響後，第二季和第三季我們的營收較上季略有成長。

Turning to our semiconductor market. Revenue was $367 million in the third quarter. After excluding the impact of the ransomware incident recovery from the second and third quarters, our semiconductor revenue was relatively flat on a sequential basis. Revenue for Electronics & Packaging market was $243 million, an increase of 8% sequentially. Exclude the impact of foreign exchange played in pass-through, third quarter revenue declined 9% on a year-over-year basis, with Q3 2022 representing combined company results.

轉向我們的半導體市場。第三季營收為 3.67 億美元。在排除第二季和第三季勒索軟體事件恢復的影響後，我們的半導體收入較上季相對持平。電子與封裝市場營收為 2.43 億美元，季增 8%。排除外匯對傳遞的影響，第三季營收年減 9%，其中 2022 年第三季代表公司合併業績。

Moving to our specialty industrial market. Revenue in the third quarter was $322 million, declining 5% sequentially. However, after excluding the impact of the ransomware incident in the second and third quarters, specialty industrial revenue was relatively stable on a sequential basis.

轉向我們的專業工業市場。第三季營收為 3.22 億美元，比上一季下降 5%。不過，排除第二、第三季勒索軟體事件的影響後，特種工業營收季減比相對穩定。

Within our specialty industrial market, sales of our general metal finishing solutions to the automotive industry were flat on a sequential basis. On a year-over-year basis, Specialty Industrial revenue was relatively flat, excluding the impact of the ransomware incident, foreign exchange inflating pass-through with Q3 2022 representing combined company results.

在我們的專業工業市場中，我們對汽車行業的通用金屬表面處理解決方案的銷售額環比持平。與去年同期相比，特種工業收入相對持平，排除勒索軟體事件、外匯膨脹傳遞的影響，2022 年第三季代表公司合併業績。

In the third quarter, overall consumables and services revenue was also consistent on a year-over-year combined company basis. Excluding the impact of foreign exchange and plating pass-through, it comprised 42% of our total revenue. We expect consumables and services revenue to remain a resilient source of revenue and profitability going forward.

第三季度，整體消耗品和服務收入與去年同期合併公司的基礎上也保持一致。排除外匯和電鍍轉嫁的影響，它占我們總收入的42%。我們預期消耗品和服務收入仍將是未來收入和獲利能力的彈性來源。

Turning to our margins. Third quarter gross margin was 47.1%, and a sequential increase of 20 basis points, exceeding the high end of our guidance. Efficient fact utilization, disciplined cost management and favorable product mix contributed to this outperformance.

轉向我們的邊緣。第三季毛利率為 47.1%，季增 20 個基點，超過我們指引的上限。高效的事實利用、嚴格的成本管理和有利的產品組合促成了這一出色的業績。

Third quarter operating expenses were $236 million, a sequential decrease of $7 million, and below low end of our guidance, reflecting continued disciplined cost management. Third quarter operating margin was 21.8% and adjusted EBITDA margin was 25.2%, both exceeded our expectations, reflecting the strength in our operating model. Our integration of Atotech continues to progress very well. We remain on track to achieve our cost synergy target of $55 million within 18 to 36 months post close.

第三季營運費用為 2.36 億美元，季減 700 萬美元，低於我們指引的下限，反映出持續嚴格的成本管理。第三季營業利益率為 21.8%，調整後 EBITDA 利潤率為 25.2%，均超出我們的預期，反映了我們營運模式的實力。我們對安美特的整合持續進展順利。我們仍有望在交易結束後 18 至 36 個月內實現 5,500 萬美元的成本協同目標。

We exited the third quarter achieving annualized synergies of nearly $45 million. Net interest expense for the third quarter was $84 million, relatively in line with our expectations. Our tax rate for the third quarter was 14%, favorable to our expectations, reflective of the success of certain tax plan initiatives following the closing of the Atotech acquisition. As a result of these efforts, we now expect full year 2023 tax rate to be 19%.

第三季結束時，我們實現了近 4,500 萬美元的年化綜效。第三季淨利息支出為8,400萬美元，相對符合我們的預期。我們第三季的稅率為 14%，符合我們的預期，反映了安美特收購完成後某些稅收計畫措施的成功。由於這些努力，我們現在預計 2023 年全年稅率為 19%。

Looking beyond the fourth quarter, we believe a low 20s percent tax rate is the right way to think about it at this time. We expect to provide a more formal update to our long-term tax rate in our fourth quarter earnings call.

展望第四季之後，我們認為 20% 的低稅率是目前考慮的正確方式。我們預計將在第四季的財報電話會議上提供更正式的長期稅率更新。

Net earnings for the third quarter were $98 million or $1.46 per diluted share.

第三季淨利為 9,800 萬美元，或攤薄後每股收益 1.46 美元。

Turning to the balance sheet and cash flow. We exited the third quarter with more than $1.3 billion of liquidity, including cash and short-term investments of $860 million, an undrawn revolving credit facility of $500 million. The cash position represents an increase was $758 million at the end of the second quarter. Free cash flow in the quarter was $142 million, primarily a result of strong cash -- strong cost control, a sequential improvement in working capital.

轉向資產負債表和現金流量。第三季結束時，我們擁有超過 13 億美元的流動資金，其中包括 8.6 億美元的現金和短期投資，以及 5 億美元的未提取循環信貸額度。第二季末現金部位增加 7.58 億美元。本季自由現金流為 1.42 億美元，主要得益於強勁的現金、強有力的成本控制以及營運資本的連續改善。

We exited the third quarter with gross debt of $5 billion. In October, we had a voluntary debt prepayment of $100 million, which is consistent with our strategy of deleveraging our balance sheet. Also in the current quarter, we successfully completed repricing by $3.6 billion secured Tranche B term loan. The repricing reduced the spread on our term loan from SOFR plus 275 basis points to SOFR plus 250 basis points, and also eliminated the credit spread adjustment respect to our term loan, which was 10 basis points at the time of the repricing.

第三季結束時，我們的債務總額為 50 億美元。 10月份，我們自願提前償還了1億美元的債務，這與我們資產負債表去槓桿的策略是一致的。同樣在本季度，我們成功完成了 36 億美元 B 級擔保定期貸款的重新定價。重新定價將我們的定期貸款利差從 SOFR 加 275 個基點降低至 SOFR 加 250 個基點，並取消了我們定期貸款的信用利差調整（重定價時為 10 個基點）。

This repricing completed despite challenging market conditions is consistent with our long-term practice of proactively managing our leverage and demonstrate the confidence lenders have in our operating model. At current rates, we estimate the combination of the repricing and prepayment will reduce our annualized interest expense by approximately $19 million.

儘管市場條件充滿挑戰，但完成的重新定價符合我們主動管理槓桿的長期做法，並表明貸款人對我們的營運模式有信心。按照目前的利率，我們估計重新定價和預付款的結合將使我們的年化利息支出減少約 1,900 萬美元。

Our net leverage ratio exiting the third quarter was 4.6x based on our trailing 12-month adjusted EBITDA. Our net leverage, as defined in the credit agreement, includes several other adjustments, and was 4.2x exiting the third quarter. Consistent with the prior quarter, we made a dividend payment of $15 million or $0.22 per share.

根據我們過去 12 個月的調整後 EBITDA，我們第三季的淨槓桿率為 4.6 倍。根據信貸協議的定義，我們的淨槓桿率包括其他幾項調整，第三季的淨槓桿率為 4.2 倍。與上一季一致，我們支付了 1500 萬美元的股息，即每股 0.22 美元。

I'll now turn to our fourth quarter outlook. We expect fourth quarter revenue of $840 million, plus or minus $40 million.

現在我將談談我們的第四季展望。我們預計第四季營收為 8.4 億美元，上下浮動 4,000 萬美元。

By end market, outlook is as follows: Revenue from a semiconductor market of $320 million plus or minus $15 million. Revenue from Electronics & Packaging market of $205 million, plus or minus $10 million and revenue from our specialty industrial market of $315 million, plus or minus $15 million.

以終端市場來看，前景如下： 半導體市場營收為 3.2 億美元上下 1,500 萬美元。電子和包裝市場的收入為 2.05 億美元，上下浮動 1000 萬美元，專業工業市場的收入為 3.15 億美元，上下浮動 1500 萬美元。

Based on the midpoint of our guidance, we now expect revenue in the second half of 2023 to be slightly lower than the first half, compared to a prior expectation that it will be slightly higher than the first half. This is primarily due to our expectation of short-term customer inventory workdowns in our semiconductor market.

根據我們指引的中點，我們現在預計 2023 年下半年的收入將略低於上半年，而先前的預期將略高於上半年。這主要是由於我們對半導體市場短期客戶庫存下降的預期。

Based on anticipated product mix and revenue levels, we estimate fourth quarter gross margin of 45.5%, plus or minus 1 percentage point. We expect operating expenses of $235 million, plus or minus $5 million, relatively consistent with third quarter levels.

根據預期的產品結構和收入水平，我們預期第四季毛利率為45.5%，上下浮動1個百分點。我們預計營運費用為 2.35 億美元，上下浮動 500 萬美元，與第三季水準相對一致。

For the fourth quarter, we estimate adjusted EBITDA of $185 million, plus or minus $20 million. For the fourth quarter, net interest expense is expected to be $80 million, reflecting current interest rates as well as our recent successful Tranche B term loan repricing and voluntary debt prepayment.

我們預計第四季度調整後 EBITDA 為 1.85 億美元，上下浮動 2,000 萬美元。第四季度的淨利息支出預計為 8000 萬美元，反映了當前利率以及我們最近成功的 B 級定期貸款重新定價和自願債務提前還款。

Our tax rate's expected to be 16% for the fourth quarter, consistent with the updated full year 2023 tax rate outlook of 19% that I mentioned earlier. Given these assumptions, we expect fourth quarter net earnings of $0.85 per diluted share plus or minus $0.27.

我們第四季的稅率預計為 16%，與我之前提到的更新後的 2023 年全年稅率展望 19% 一致。鑑於這些假設，我們預計第四季度攤薄後每股淨利潤為 0.85 美元上下浮動 0.27 美元。

In closing, we executed very well in maintaining profitability and generating solid cash flow despite cyclical softness in our end markets. These are things we can control. We remain confident in long-term segment growth opportunities across our portfolio. If the market does bounce back, we are well positioned to emerge from the current environment even stronger than we were going in.

最後，儘管終端市場出現週期性疲軟，但我們在保持獲利能力和產生穩定現金流方面表現出色。這些都是我們可以控制的。我們對整個投資組合的長期細分成長機會仍然充滿信心。如果市場確實反彈，我們就處於有利位置，可以從當前環境中走出來，甚至比我們進入時更強大。

With that, I'll turn it back to the operator for Q&A.

這樣，我會將其轉回給接線員進行問答。

(Operator Instructions)

（操作員說明）

The first question comes from Krish Sankar at TD Cowen.

第一個問題來自 TD Cowen 的 Krish Sankar。

I had 2 of them, John, and the first one, I understand your semi revenues are worth than WFE, which happens during a cyclical downturn. It also probably looks like a tad lower than some of your peers. So I'm curious, is that purely because of your dep etch exposure? Or is there something else going on, on the market share front? And then I have a follow-up.

我有兩個，約翰，第一個，我知道你的半收入比 WFE 值錢，這是在周期性衰退期間發生的。它也可能看起來比你的一些同行低一點。所以我很好奇，這純粹是因為你的深蝕刻暴露嗎？或者在市場佔有率方面還有其他事情發生嗎？然後我有一個後續行動。

Yes, Krish, thanks for the question. I think it's pretty simple. We are an enabler for vertical NAND. I think we've talked about that in the past. And as I think we've heard and you've heard from many of our customers, NAND is one of the WFE segments that's really particularly down. And so our exposure there and, therefore, our enablement there is really what's causing us to be slightly worse than maybe some of our peers.

是的，克里什，謝謝你的提問。我認為這很簡單。我們是垂直 NAND 的推動者。我想我們過去已經討論過這個問題。我認為我們和您從我們的許多客戶那裡都聽說過，NAND 是跌勢尤其嚴重的 WFE 細分市場之一。因此，我們在那裡的曝光度以及我們在那裡的支持確實是導致我們比一些同行略差的原因。

But I want to remind everybody, we love being an enabler for VNAND in the industry with our RF Power Solutions. And of course, I don't think anybody would say VNAND won't come back. It's certainly in a cyclical downturn. But when it comes back, we'll be enjoying that market leadership again.

但我想提醒大家，我們熱衷於透過 RF 電源解決方案成為業界 VNAND 的推動者。當然，我認為沒有人會說 VNAND 不會回來。毫無疑問，它正處於週期性衰退之中。但當它回來時，我們將再次享受市場領導地位。

Got it. got it. And then I just wanted to follow up on some of the Advanced Packaging. You highlighted Atotech exposure there. But it looks like Atotech as a percentage of revenue has really kind of been in this low 30% range for the last couple of quarters. Are you not seeing any of the benefits from advanced packaging? Or is it too early for that?

知道了。知道了。然後我只想跟進一些先進封裝。您強調了安美特在那裡的曝光。但看起來安美特在過去幾季的營收百分比確實處於 30% 的低水平。您沒有看到先進封裝的任何好處嗎？或者現在還太早嗎？

Yes, I think it's early days, Krish. I think one of the things we talk about is package substrates. This is the Advanced Packaging that we've talked about. Lots of interest, lots of acceleration there, especially in high-performance computing. And so we're seeing a lot of that interest. But that's still a relatively small percentage, but we expect that to grow as a percentage of Advanced Packaging and packaging overall.

是的，我認為現在還為時過早，克里什。我認為我們談論的事情之一是封裝基板。這就是我們所說的先進封裝。人們對此很感興趣，也有很多加速，特別是在高效能運算方面。所以我們看到了很多這種興趣。但這仍然是一個相對較小的百分比，但我們預計該比例在先進封裝和整體封裝中所佔的比例將會成長。

(Operator Instructions) Next question comes from Joe Quatrochi at Wells Fargo.

（操作員說明）下一個問題來自富國銀行的 Joe Quatrochi。

It looks like your chemicals revenue was up nicely sequentially in the quarter. Wondering if -- how much of that is just normal seasonality or maybe some pass-through of the palladium costs.

看來您的化學品收入在本季環比成長良好。想知道其中有多少只是正常的季節性因素，或者可能是鈀金成本的一些轉嫁。

Yes, Joe. So certainly, part of it was seasonality, but it was a little better than we expected, even taking into account seasonality. Now as we've said in our prepared remarks, there was a little bit of pull-in because of the holiday week in the first quarter, Q4. But it was just a little better. And so we're happy to see that.

是的，喬。當然，部分原因是季節性因素，但即使考慮到季節性因素，情況也比我們預期的要好一些。正如我們在準備好的發言中所說，由於第一季（即第四季）的假期週，出現了一些拉動。但也只是好一點而已。所以我們很高興看到這一點。

Got it. And then maybe on the semi side, one of your peers had talked about preparing for kind of flattish 2024 and talking to their customers. I guess, curious how you're thinking about that and maybe, in the context, you did talk about NAND being definitely weaker, how you're thinking about the setup into next year?

知道了。然後，也許在半成品方面，您的一位同行談到了為 2024 年的平淡做好準備，並與他們的客戶交談。我想，很好奇你是如何看待這個問題的，也許，在上下文中，你確實談到了 NAND 肯定較弱，你如何考慮明年的設定？

Yes. Obviously, we read the same things you guys do, and the visibility is poor for the industry right now. I think what we're preparing for is to continue supporting our customers in R&D so that, when it comes back, we will be enjoying an even stronger position. And in the meantime, we're watching costs very closely as you can see from our numbers.

是的。顯然，我們讀到的東西和你們所做的一樣，而且目前該行業的知名度很差。我認為我們正在準備的是繼續在研發方面支持我們的客戶，這樣，當它回來時，我們將享有更強大的地位。同時，我們正在非常密切地關注成本，正如您從我們的數據中看到的那樣。

I think the industry is kind of looking at first half is relatively muted, kind of the same as kind of the second half of '23. And then I think after that, I think there's varying opinions. So that's what I would say, is that we're reading the same kind of things you are. And it looks pretty flat for the next few quarters to us as well.

我認為該行業上半年相對平靜，與 23 年下半年的情況類似。然後我想在那之後，我認為會有不同的意見。所以我想說的是，我們正在閱讀與您相同的東西。對我們來說，未來幾季的情況看起來也相當平穩。

The next question comes from Steve Barger at KeyBanc Capital Markets.

下一個問題來自 KeyBanc Capital Markets 的 Steve Barger。

Thanks. John, I think we all understand this has been a really challenging cycle, but the stock is obviously acting like there are bigger risks and problems here. So can you just discuss again why you're confident MKS is better with ATC in the portfolio? And maybe further discuss just how you see this playing out in coming quarters and years?

謝謝。約翰，我想我們都知道這是一個非常具有挑戰性的周期，但該股顯然表現得似乎有更大的風險和問題。那麼您能否再次討論為什麼您有信心 MKS 與 ATC 一起在投資組合中表現更好？也許還可以進一步討論您如何看待未來幾季和幾年的情況？

Yes, Steve, thanks for the question. So we've talked about Advanced Packaging, and we've talked about how critical that's going to be to enable the next generation of electronics. So as I said in our prepared remarks, it's no longer that just the semiconductor will enable advanced electronics. I think everybody is talking about chiplet packaging or systems packaging. If we are going to continue as an industry pushing the concept, the economic concept of Moore's Law.

是的，史蒂夫，謝謝你的提問。我們討論了先進封裝，也討論了它對於實現下一代電子產品的重要性。正如我在準備好的演講中所說，先進電子產品不再只依賴半導體。我認為每個人都在談論小晶片封裝或系統封裝。如果我們要繼續作為一個產業來推動這個概念，摩爾定律的經濟概念。

So we love having Atotech as part of our portfolio. There's no other company that has market leadership in packaging the chemistry and the equipment, that's Atotech, as well as market leadership and a broad set of technologies in the semiconductor critical subsystems. As we've talked about in the past, that enables dep and etch, as well as lithography, metrology and inspection. So we firmly believe that the combination of both really sets up MKS uniquely for the future.

因此，我們喜歡安美特成為我們產品組合的一部分。安美特在化學和設備封裝方面擁有市場領先地位，並且在半導體關鍵子系統方面擁有市場領先地位和廣泛的技術，沒有其他公司能夠做到這一點。正如我們過去所討論的，這使得深度和蝕刻以及光刻、計量和檢查成為可能。因此，我們堅信，兩者的結合確實為 MKS 的未來奠定了獨特的基礎。

And can you just talk about what the feedback has been from customers as you go out and maybe how you see the CapEx cycle next year and what you think that can translate into for MK?

您能否談談客戶的回饋，以及您如何看待明年的資本支出週期以及您認為這可以為 MK 帶來什麼？

Well, customers are certainly very receptive to the concept of MKS bringing more solutions to them that include lasers as well as chemistry equipment and then other types of packaging solutions.

嗯，客戶當然非常接受 MKS 為他們帶來更多解決方案的概念，其中包括雷射、化學設備以及其他類型的包裝解決方案。

In terms of CapEx, I think that's, similar to Joe's question, it's going to be something that seems a bit muted. For packaging, though, I think next year, if things stabilize, the compares will be good. But your guess is as good as mine as to how much it comes back.

就資本支出而言，我認為這與喬的問題類似，這將是一個看起來有點沉默的問題。不過，對於包裝而言，我認為明年，如果情況穩定下來，比較將會很好。但對於它能返回多少，你的猜測和我的一樣好。

But I would also comment that the packaging market for us is less cyclical. There are cycles for sure, but the amplitude is much less than semi CapEx, as you've seen in our numbers.

但我還要評論說，我們的包裝市場的周期性較小。肯定存在週期，但幅度遠小於半資本支出，正如您在我們的數據中看到的那樣。

Got it. And Seth, can I squeeze in a quick one? Can you -- sorry if I missed it. Did you talk about free cash flow in 4Q? And can we expect incremental debt paydown in the remainder of this year?

知道了。塞斯，我可以快速插話一下嗎？你可以嗎——抱歉，如果我錯過了。您談到了第四季的自由現金流嗎？我們能否預期今年剩餘時間將逐步償還債務？

Yes. We didn't disclose or give guidance on the free cash flow in Q4. You saw Q3 was quite strong, by the way, Steve, and it's certainly -- that's our goal going forward to drive that free cash flow up. So it will depend on working capital needs, but -- so we didn't really give that type of guidance in the fourth quarter.

是的。我們沒有揭露或給出有關第四季度自由現金流的指導。順便說一句，史蒂夫，你看到第三季相當強勁，這當然是我們推動自由現金流上升的目標。因此，這將取決於營運資金需求，但是——所以我們在第四季度並沒有真正給出這種類型的指導。

In terms of debt paydown, we have done a lot of point of leverage that you saw in prepared remarks. We did $100 million in October. And our plan to deleverage going forward, and that will roll out as the year progresses. We did the repricing, that took $11 million off the table. So that's again a lever we pulled. With Atotech, we've driven the tax rate down long term as well. That's a big value-driver. And then the cost synergies is $45 million to $55 million one year end.

在償還債務方面，我們已經做了很多你在準備好的評論中看到的槓桿作用。 10 月我們賺了 1 億美元。我們未來的去槓桿化計畫將隨著今年的進展而推出。我們重新定價，省了 1100 萬美元。這又是我們拉動的一個槓桿。透過安美特，我們也長期降低了稅率。這是一個很大的價值驅動因素。年底的成本綜效為 4,500 萬至 5,500 萬美元。

So things we can control, as in the prepared remarks, we've actually done a lot already in a short period of time. There's more opportunity going forward as well. And that will roll out. There's no change in our philosophy to delever, drive free cash flow, drive the integration activities, which we find very well.

所以我們可以控制的事情，就像在準備好的發言中一樣，我們實際上已經在很短的時間內做了很多事情。未來還有更多機會。這將會推出。我們的去槓桿化、推動自由現金流、推動整合活動的概念並沒有改變，我們對此非常滿意。

And the next question comes from Jim Ricchiuti at Needham & Company.

下一個問題來自 Needham & Company 的 Jim Ricchiuti。

I wanted to focus on the photonics solutions, portion of the semi business, which appears to be holding up better. And John, maybe you could talk to what your visibility or line of sight in that area of the business. Are you any more optimistic that, that portion of the business is able to hold up in this cyclical downturn?

我想重點關注光子解決方案，這是半業務的一部分，它似乎表現得更好。約翰，也許你可以談談你在該業務領域的可見度或視線。您是否更樂觀地認為，這部分業務能夠在這次週期性衰退中保持穩定？

Yes, Jim, I think we do believe that there is less cyclicality in the lithography, metrology inspection part of the semi business. And we've seen that play out over multiple quarters. We are in constant contact with those key customers. And you can see what they say publicly about their revenue over the next several quarters as well.

是的，吉姆，我認為我們確實相信半業務的光刻、計量檢測部分的周期性較小。我們已經看到這種情況在多個季度都在發生。我們與這些主要客戶保持持續的聯繫。您還可以看到他們公開談論未來幾季的收入。

So we believe that that's really just an area of semi that's just much more consistent than certainly the dep etch part. So that's our visibility right now, and that's our belief that it will continue.

所以我們相信這其實只是半成品的一個區域，它比深蝕刻部分更一致。這就是我們現在的知名度，也是我們相信這種情況將會持續下去的信念。

And on the specialty industrial, obviously, it's a newer area for you. And are you more concerned now about the overall macro environment potentially impacting that portion of the business as we enter 2024? In other words, are you any more concerned about the near-term outlook in that area of the business?

顯然，在特種工業方面，這對您來說是一個較新的領域。進入 2024 年，您現在是否更擔心整體宏觀環境可能會影響這部分業務？換句話說，您是否更關心該業務領域的近期前景？

Yes, Jim, I mean, what we've seen in the past is that the industrial part has been pretty steady, our revenue in it. But we're always watching some of the key markets, such as automotive, and that's why we made the comment about automotive in our prepared remarks.

是的，吉姆，我的意思是，我們過去看到的是工業部分非常穩定，我們的收入也在其中。但我們一直在關註一些關鍵市場，例如汽車市場，這就是我們在準備好的評論中發表有關汽車的評論的原因。

But as I said in the past too, industrials are certainly less cyclical than the semi-CapEx world. Also, a comment that much of our industrial revenue is utilization-dependent chemistry. So that adds a little more stability to it. But to your point, Jim, we're always watching the macro environment to see how that may or may not affect our industrial business.

但正如我過去所說，工業業的周期性肯定不如半資本支出產業。另外，有評論指出我們的大部分工業收入來自依賴利用率的化學。這樣就增加了一點穩定性。但就你的觀點而言，吉姆，我們一直在關注宏觀環境，看看這可能會或可能不會影響我們的工業業務。

I'll just lob one more in. I was just wondering on Geode, you seem to be getting some traction. How should we be thinking about the potential for that to be a bigger contributor in the near term?

我會再投一個。我只是想知道 Geode，你似乎得到了一些關注。我們應該如何看待它在短期內成為更大貢獻者的潛力？

Yes. I think what we talked about at this call was this low earth orbit application, the PCBs that are needed to support that, both on the satellites as well as the ground stations. And that had a technology requirement that our tool was uniquely positioned to deliver on that. So that's just another proof point of the technology that we've developed.

是的。我認為我們在這次電話會議上討論的是低地球軌道應用，以及衛星和地面站上支援該應用所需的 PCB。這有一個技術要求，我們的工具具有獨特的定位來實現這一點。這只是我們開發的技術的另一個證明點。

I think that we continue to make progress in other areas as well. And so we just wanted to point out that we continue to get signs that what we've developed and the technology there is really unique.

我認為我們在其他領域也繼續取得進展。因此，我們只是想指出，我們不斷收到跡象表明我們開發的產品和技術確實是獨一無二的。

The next question comes from Sidney Ho at Deutsche Bank.

下一個問題來自德意志銀行的 Sidney Ho。

Great. I'm not trying to ask for a specific guidance for next year. How are you thinking about the revenue trajectory for each segment in 2024? Do you think there will be another step down in the first half in any of the segments, whether it's cyclically or seasonally? It sounds like you think semis will be flattish for a few quarters, but how about the other segments? And what kind of visibility do you have right now? Any color by segment or even by end market will be great.

偉大的。我並不是想尋求明年的具體指導。您如何看待 2024 年每個細分市場的營收軌跡？您認為上半年任何細分市場是否會進一步下滑，無論是週期性或季節性？聽起來您認為半決賽將在幾個季度內表現平平，但其他部分又如何呢？您現在的知名度如何？任何細分市場甚至終端市場的顏色都會很棒。

Yes. Thanks, Sidney. Yes, I think we talked about semi, and kind of bouncing on the bottom, as we said. I would say Specialty Industrials has just held up and been very steady for this whole duration of the semi downturn. So that's kind of the expectation.

是的。謝謝，西德尼。是的，我想我們討論過半，以及底部彈跳，正如我們所說。我想說，特種工業在整個半低迷時期一直保持著穩定的狀態。這就是我們的期望。

Electronics & Packaging did see some cyclicality as you've seen in the quarter. There is some seasonality to it as well, but certainly less cyclical in terms of amplitude than the semi business. And it's much more utilization-dependent. So I think that we watch the macro demand for PCs and servers and all that, and that drives some of that Electronics & Packaging business.

正如您在本季度所看到的那樣，電子與包裝確實存在一些週期性。它也有一定的季節性，但就幅度而言，週期性肯定不如半成品企業。而且它更依賴利用率。因此，我認為我們正在關注對個人電腦和伺服器等的宏觀需求，這推動了部分電子和包裝業務的發展。

So I think the Semi recovery and Electronics & Packaging recovery may go hand in hand, but the amplitude of those are much different -- very different between the 2 markets.

因此，我認為半成品復甦和電子與包裝復甦可能齊頭並進，但其幅度有很大不同——這兩個市場之間非常不同。

Okay. That's fair. Now my second question is you guys have a good track record of deleveraging of an acquisition. Given the sluggish demand, what is a realistic gross leverage ratio we should be expecting by the end of calendar '24? And how should we think about the levers other than waiting for the business to recover?

好的。這還算公平。現在我的第二個問題是，你們在收購去槓桿化方面有著良好的記錄。鑑於需求低迷，我們預計到 24 世紀末實際的總槓桿率應該是多少？除了等待業務復甦之外，我們該如何考慮槓桿？

Yes. Thanks. Yes. So you kind of asked for guidance looking out in '24. So I probably can't give you that type of details. But obviously, Q3 kind of give you a snapshot at sort of those revenue levels, what type of cash flow comes off the business. So you're going to have that view in mind. As John mentioned, we think semi is kind of at the trough levels, or at least low levels for sure, historically speaking, certainly in the NAND environment. So we think that will over time be an opportunity for us.

是的。謝謝。是的。所以你有點尋求24年的指導。所以我可能無法向您提供此類詳細資訊。但顯然，第三季讓您大致了解了這些收入水平，以及業務產生的現金流類型。所以你會牢記這種觀點。正如約翰所提到的，我們認為半成品處於低谷水平，或至少肯定處於低水平，從歷史角度來看，尤其是在 NAND 環境中。因此，我們認為隨著時間的推移，這對我們來說將是一個機會。

But I would say, fundamentally, it will be revenue driven. We will work hard on working capital efficiency. We think we have more activity in certain areas that we're working on pretty hard right now. But I would say it's really revenue, profitability driven and then working capital management. And you saw in the Q3 results, we worked very hard to deliver really quite strong results given the environment.

但我想說，從根本上來說，這將是收入驅動的。我們將努力提高營運資金效率。我們認為我們在某些​​領域有更多的活動，我們現在正在努力工作。但我想說，這實際上是收入、獲利能力驅動，然後是營運資本管理。您在第三季的業績中看到，考慮到環境，我們非常努力地交付了非常強勁的業績。

So I think those are things I would focus on, and things we're kind of working pretty hard. And that's been our playbook historically speaking.

所以我認為這些是我會關注的事情，也是我們正在努力工作的事情。從歷史上看，這就是我們的劇本。

I am showing no further questions at this time. So this concludes the question-and-answer session. I would now like to turn it back to David Ryzhik with closing remarks.

我目前沒有提出任何進一步的問題。那麼，問答環節就到此結束。現在我想請戴維·雷日克 (David Ryzhik) 發言並作結束語。

Thank you for joining us today and for your interest in MKS. Operator, you may close the call, please.

感謝您今天加入我們並感謝您對 MKS 的興趣。接線員，請掛斷電話。

Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.

感謝您參加今天的會議。這確實結束了程序，您現在可以斷開連接。