Brooks
Automation Q3
| Brooks
Automation Q3
|
| (FOOL
CONFERENCE
CALL SYNOPSIS)* By Dale Wettlaufer Brooks Automation Buffalo, N.Y., July 26, 1996/FOOLWIRE/---Brooks Automation reported Q3 revenues of $25.3 million and EPS of $0.29 yesterday, representing 81% and 61% increases, respectively, from Q3 1995. Revenues for the first nine months of FY 1996 were up 92% from the year-ago period, to $66.4 million and EPS was up 54%, to $0.77 from $0.50.
From the press release:
Commenting on the quarter, Robert J. Therrien, President and Chief Executive Officer of Brooks Automation, said: "I am particularly pleased with the Company's third quarter results, including record orders, despite a slowdown of the semiconductor equipment industry widely reported during the last couple months. The Company introduced the "Leap Frog," a next generation, high speed vacuum transfer robot and other new products last week at Semicon West which generated significant interest from both existing and potential customers considering strategic process equipment investments to enable production of advanced semiconductors (feature sizes at 0.5 micron and below). We will continue to proceed with caution to invest in advanced wafer handing technology for the long-term benefit of our constituents." _______________
During the quarter, Brooks Canada's ControlVision sales accounted for 10% of sales. This line is part of the TechWare acquisition made in February, 1996. Sales increased significantly to both Lam and Novellus, two large and visible OEM ramping production of latest-generation cluster tools for advanced device production. An equipment study published last month predicts cluster tool will grow next year, and over the next five years, faster than the overall front-end market. Sales to LAM accounted for 28% of Q3 business and 21% year-to-date. Sales have also increased to other OEMs working new tools. Not all business was up, though. Sales in older-generation systems were down--specifically, atmospheric business. Sales of new flat panel systems were $1.7 million in the quarter, including new conditioning modules and a new de-gas systems, where Brooks incurred unforeseen costs to meet customer needs.
Gross margin was 41.4% for Q3, down 1.1 percentage points from Q2 and year-to-date gross margin. Orders, net of cancellations, grew 5% to $27.5 million. Backlog increased to $34 million+. Operating, SG&A, and R&D expenses increased $300,000 during the quarter. During the quarter, Brooks opened its new customer support technology center in Japan. Headcount increased about 6%, mainly in engineers for software and application-support in Brooks Canada.
Operations generated about $3 million after using $5 million in Q3. The bulk of the improvement came in inventory and receivables management. Brooks executed a licensing agreement for aligner technology, which closed a long-standing patent dispute.
Semicon West went well for Brooks, where they launched three new product lines: 300 mm. 6-sided platform; 200 mm. factory interface modules; and the new Leap Frog robot. Top ten customers represented 78% of revenues in Q3, as several OEMs ramped new systems. Brooks started the year with the objective of adding five new OEMs. In Q1 and Q2, they added TEL (Tokyo Electron Ltd.) America, Eaton, LG-- Korea, TEL Japan, Kokisai Electric--Japan, Alvac--Japan, Genus Ion Implant, and Giusong Engineering, Korea. In Q3, four new OEMs brought the total new OEM business to 12, with Concept Systems, Electrotech--UK, XMR, and Sumitomo--Japan. International sales represented 15% of Q3 revenues. The company continues to see solid market penetration in Japan, Korea, and Europe. Approximately 49% of world semiconductor capital equipment is manufactured in the US and 44% is manufactured in Japan. Thus Japan is critical to Brooks' international success.
Modules represent 49% of Q3 business, in line with the last quarter. Systems accounted for 51%. Four new vacuum cassette factory interfaces were introduced at Semicon West. Requirements vary with geographies--the company believes this is the first truly modular system. Beta shipments should begin in Q1 1997 with volume shipping in Q2 1997. The Leap Frog should open new markets for Brooks, such as ion implant, where process times are as low as 10 seconds and where wafer exchange is key to throughput. Production units should ship in late Q2 1997. In atmospheric applications, the new A600 atmospheric cluster tool platform is targeted at RTP, ashing, dry-cleaning, and epytaxial applications. This is a cost-reduced Marathon application aimed at lower-cost and higher-throughput users. This will extend the company's reach beyond the traditional PVD, CVD, and etch product offerings. Beta testing begins in Q4 1996 and production shipments in Q2 1997. The company expects PVD-related business to see significant growth in FY 1996 and expects that it is emerging as the technology leader in this most complex of all vacuum process tools. The company has now received orders from six of the PVD companies and is in talks with the most of the remaining OEMs. FY 96 PVD business should see a growth factor of 4+ and FY97 another 2+ growth factor on top of 1996.
300 mm. is another growth area; Brooks believes it will be designed into a high percentage of 300 mm. cluster tools and further believes that 300 mm. is well underway with these systems. To date, seven Brooks VacuuTran 4000 systems have been shipped for 300 mm. wafer R&D platforms. Internal consumption for development activities on 300 mm. for the OEMs will be a subtntial business in the near-term. FY 1996 revenues in 300 mm. should be about $1.9 million and FY97 is forecast to grow 3X from FY 96, to $5.7 million. Q3 was a solid quarter in flat panels--new FPD fabs will be built if larger laptop displays are well-received.
Process tools, software products, is going well and is evidence that the Techware acquisition was a strategic one. Brooks believes that ControlVision software engineers are ahead of the industry in standardizing software programs and are better are better positioned with their software, in that the end-user will design the specific application with standard commands and more stable software.
In down markets, technology becomes more important, and in up cycles, production capacity becomes more important. Brooks believes that it is delivering on the technology front in this down market and that it they are gaining market share. In 1996, the expect to exit the year with 80% growth while the rest of the market is growing in the 30% range.
Q & A
Inventory turns improved because of a decrease in inventory and an increase in sales. FPD product had been building and that started to move well on a long lead-time basis.
The company is forecasting sequential growth, sequential growth in sales to Lam, and sequential earnings growth. Lam business may be down proportionate to total sales but not on an absolute dollar basis. To achieve 80% growth this year, Brooks would have to do less than the $90 million+ estimates that are out there. So, that 80% growth estimate is somewhat conservative from the management's standpoint. Free cash flow was approximately $1 million during the quarter. Earlier in the call, an Information Network Inc. study on cluster tools was cited. That study forecasted compounded annual growth rate over the next five years of 26%. Dataquest's forecast for overall front-end CAGR for the next five years is 16%. Brooks estimates that as much as two-thirds of Applied Materials' architectures are cluster tools.
In 1996, Japan should account for $10 in sales and the company is forecasting 100% growth in that segment for FY 1997. About half of that will be flat panel business.
There have been cancellations and pushouts, but these have been a "couple percent of bookings" in the last quarter. Product cycles are shortening and this is a challenge for Brooks to stay on top of the trends and to continue R&D investment. Brooks is early in the food chain and has to deliver product, especially in R&D units, early in a product cycle and does bear some risk when the industry moves to new processes and wafer sizes. Book/bill is staying above 1.0 and bookings right now are higher than sales made in the last quarter.
Headcount is up 27 for the quarter to 441 worldwide. R&D and development application software engineers headcount is running at about 140, production personnel is around 100+, and the bulk of the rest are sales personnel and application-support engineers.
The company's Korean business (shipments and orders) amounted to about $500,000 during the quarter. That's direct Korean business and does not include business going through US OEMs. There are about 250 systems with Brooks content in them in Korea, so they want to deal with end-users.
On signs of the bottom: Companies' micro-managing of expenses bodes well for Brooks. One should understand the industrial production index and chip demand. Those are pretty clear-cut indicators. Brook's CEO hopes to see increased chip demand by the end of the year. The company also relies heavily upon staying close to the customers, especially within the top ranks of the company. * A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. | |
Copyright 1996,
The Motley Fool |