MKS Instruments, Inc. (NASDAQ: MKSI), a global provider of enabling
technologies that transform our world, today reported second
quarter 2023 financial results.
“We delivered strong results in the second quarter, led by solid
execution and disciplined cost management,” said John T.C. Lee,
President and Chief Executive Officer.
Mr. Lee added, “Longer term, we are very excited about how we
are positioned to capitalize on multiple secular tailwinds that are
driving our served markets. AI, cloud, virtual reality, and
electrification are among the applications powering the need for
innovation in advanced electronics devices, and the critical
solutions that we have added with the Atotech acquisition have made
MKS foundational to enabling that innovation.”
“We delivered revenue and Non-GAAP net earnings per diluted
share above the midpoint of our guidance for the quarter and
continue to make great progress on the integration of Atotech,”
said Seth H. Bagshaw, Executive Vice President and Chief Financial
Officer. “The non-cash impairment charges we recorded this quarter,
primarily resulting from softer demand in the PC and smartphone
markets and higher interest rates, do not temper our enthusiasm for
what we are building in Electronics & Packaging. We believe we
are poised to benefit from an eventual market recovery.”
Mr. Bagshaw added, “Near-term, we continue to expect MKS’ total
revenue in the second half of the year to be slightly higher than
first half levels, driven by modest improvements across all three
of our end markets. We also expect cash flow to normalize in the
third quarter and look forward to making steady progress in
de-levering the balance sheet.”
Third Quarter 2023 Outlook
The Company expects for the third quarter of 2023, revenue of
$930 million, plus or minus $50 million, Adjusted EBITDA of $210
million, plus or minus $26 million, and Non-GAAP net earnings per
diluted share of $0.98, plus or minus $0.29.
Conference Call Details
A conference call with management will be held on Thursday,
August 3, 2023 at 8:00 a.m. (Eastern Time). To participate in the
call by phone, participants should visit the Investor Relations
section of MKS’ website at investor.mks.com and click on Events
& Presentations, where you will be able to register online and
receive dial-in details. We encourage participants to register and
dial in to the conference call at least 15 minutes before the start
of the call to ensure a timely connection. A live and archived
webcast and related presentation materials will be available on the
Investor Relations section of the MKS website.
About MKS Instruments
MKS Instruments enables technologies that transform our world.
We deliver foundational technology solutions to leading edge
semiconductor manufacturing, electronics and packaging, and
specialty industrial applications. We apply our broad science and
engineering capabilities to create instruments, subsystems,
systems, process control solutions and specialty chemicals
technology that improve process performance, optimize productivity
and enable unique innovations for many of the world's leading
technology and industrial companies. Our solutions are critical to
addressing the challenges of miniaturization and complexity in
advanced device manufacturing by enabling increased power, speed,
feature enhancement, and optimized connectivity. Our solutions are
also critical to addressing ever-increasing performance
requirements across a wide array of specialty industrial
applications. Additional information can be found at
www.mks.com.
Use of Non-GAAP Financial Results
This press release includes financial measures that are not in
accordance with U.S. generally accepted accounting principles
(“Non-GAAP financial measures”). These Non-GAAP financial measures
should be viewed in addition to, and not as a substitute for, MKS’
reported results under U.S. generally accepted accounting
principles (“GAAP”), and may be different from Non-GAAP financial
measures used by other companies. In addition, these Non-GAAP
financial measures are not based on any comprehensive set of
accounting rules or principles. MKS management believes the
presentation of these Non-GAAP financial measures is useful to
investors for comparing prior periods and analyzing ongoing
business trends and operating results.
MKS is not providing a quantitative reconciliation of
forward-looking Non-GAAP net earnings per diluted share and
Adjusted EBITDA to their most directly comparable GAAP financial
measures because it is unable to estimate with reasonable certainty
the ultimate timing or amount of certain significant items without
unreasonable efforts. These items include, but are not limited to,
acquisition and integration costs, amortization of intangible
assets, ransomware remediation costs, restructuring and other
expense, goodwill and intangible asset impairments or other asset
impairments, debt refinancing, prepayments of term loan principal,
and the income tax effect of these items. These items are
uncertain, depend on various factors, including, but not limited
to, our acquisition of Atotech Limited (“Atotech”) in August 2022
(the “Atotech Acquisition”), timing of ransomware remediation, and
interest rate and refinancing environment, and could have a
material impact on GAAP reported results for the relevant
period.
For further information regarding these Non-GAAP financial
measures, please refer to the tables presenting reconciliations of
our Non-GAAP results to our GAAP results and the “Notes on Our
Non-GAAP Financial Information” at the end of this press
release.
|
Selected GAAP and Non-GAAP Financial
Measures(In millions, except per share
data) |
|
|
|
|
|
|
|
|
Year to Date |
|
Q2 2023 |
|
|
Q1 2023 |
|
|
Q2 2022 |
|
|
Q2 2023 |
|
|
Q2 2022 |
|
Net
Revenues |
|
|
|
|
|
|
|
|
|
Semiconductor |
$ |
440 |
|
|
$ |
309 |
|
|
$ |
515 |
|
|
$ |
750 |
|
|
$ |
1,003 |
|
Electronics and Packaging |
225 |
|
|
222 |
|
|
49 |
|
|
447 |
|
|
109 |
|
Specialty Industrial |
338 |
|
|
263 |
|
|
201 |
|
|
600 |
|
|
395 |
|
Total net revenues |
$ |
1,003 |
|
|
$ |
794 |
|
|
$ |
765 |
|
|
$ |
1,797 |
|
|
$ |
1,507 |
|
GAAP
Financial Measures |
|
|
|
|
|
|
|
|
|
Gross margin |
46.9 |
% |
|
42.2 |
% |
|
44.2 |
% |
|
44.8 |
% |
|
44.6 |
% |
Operating margin |
(169.1 |
%) |
|
0.1 |
% |
|
21.5 |
% |
|
(94.3 |
%) |
|
22.3 |
% |
Net (loss) income |
$ |
(1,769 |
) |
|
$ |
(42 |
) |
|
$ |
130 |
|
|
$ |
(1,812 |
) |
|
$ |
273 |
|
Diluted (loss) earnings per
share |
$ |
(26.47 |
) |
|
$ |
(0.64 |
) |
|
$ |
2.32 |
|
|
$ |
(27.14 |
) |
|
$ |
4.89 |
|
Non-GAAP
Financial Measures |
|
|
|
|
|
|
|
|
|
Gross margin |
46.9 |
% |
|
42.2 |
% |
|
44.2 |
% |
|
44.8 |
% |
|
44.6 |
% |
Operating margin |
22.6 |
% |
|
12.1 |
% |
|
24.1 |
% |
|
17.9 |
% |
|
24.8 |
% |
Net earnings |
$ |
88 |
|
|
$ |
32 |
|
|
$ |
145 |
|
|
$ |
120 |
|
|
$ |
296 |
|
Diluted earnings per
share |
$ |
1.32 |
|
|
$ |
0.48 |
|
|
$ |
2.59 |
|
|
$ |
1.80 |
|
|
$ |
5.31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional Financial Information
At June 30, 2023, the Company had $758 million in cash and
short-term investments, $5.1 billion of secured term loan principal
outstanding, and up to $500 million of additional borrowing
capacity under a revolving credit facility, subject to certain
leverage ratio requirements. During the second quarter of 2023, the
Company paid a cash dividend of $15 million or $0.22 per diluted
share.
SAFE HARBOR FOR FORWARD-LOOKING
STATEMENTS
This press release contains “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of
1995, Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934 regarding the future financial
performance, business prospects and growth of MKS Instruments, Inc.
(“MKS”, the “Company”, “our”, or “we”). These statements are only
predictions based on current assumptions and expectations. Any
statements that are not statements of historical fact (including
statements containing the words “will,” “projects,” “intends,”
“believes,” “plans,” “anticipates,” “expects,” “estimates,”
“forecasts,” “continues” and similar expressions) should be
considered to be forward-looking statements. Actual events or
results may differ materially from those in the forward-looking
statements set forth herein. Among the important factors that could
cause actual events to differ materially from those in the
forward-looking statements that we make are the need to generate
sufficient cash flows to service and repay the substantial
indebtedness we incurred in connection with the Atotech
Acquisition; the terms of our existing credit facilities under
which we incurred such debt; our entry into the chemicals
technology business through the Atotech Acquisition, in which we do
not have experience and which may expose us to significant
additional liabilities; the risk that we are unable to integrate
the Atotech Acquisition successfully or realize the anticipated
synergies, cost savings and other benefits of the Atotech
Acquisition; the ongoing assessment of the ransomware incident we
identified on February 3, 2023, including legal, reputational,
financial and contractual risks resulting from the incident, and
other risks related to cybersecurity, data privacy and intellectual
property; competition from larger, more advanced or more
established companies in our markets; the ability to successfully
grow our business and the businesses of Atotech and Electro
Scientific Industries, Inc., which we acquired in February 2019,
and financial risks associated with those and potential future
acquisitions, including goodwill and intangible asset impairments;
manufacturing and sourcing risks, including those associated with
limited and sole source suppliers and the impact and duration of
supply chain disruptions, component shortages, and price increases;
changes in global demand and the impact of COVID-19 or any other
pandemic, including with respect to such supply chain disruptions,
component shortages and price increases; risks associated with
doing business internationally, including trade compliance,
regulatory restrictions on our products, components or markets,
particularly the semiconductor market, and unfavorable currency
exchange and tax rate fluctuations, which risks become more
significant as we grow our business internationally and in China
specifically; conditions affecting the markets in which we operate,
including fluctuations in capital spending in the semiconductor,
electronics manufacturing and automotive industries, and
fluctuations in sales to our major customers; disruptions or delays
from third-party service providers upon which our operations may
rely; the ability to anticipate and meet customer demand; the
challenges, risks and costs involved with integrating or
transitioning local and international operations of the companies
we have acquired; risks associated with the attraction and
retention of key personnel; potential fluctuations in quarterly
results; dependence on new product development; rapid technological
and market change; acquisition strategy; volatility of stock price;
risks associated with chemical manufacturing and environmental
regulation compliance; risks related to defective products;
financial and legal risk management; and the other important
factors described in MKS’ Annual Report on Form 10-K for the year
ended December 31, 2022 and any subsequent Quarterly Reports on
Form 10-Q, as filed with the SEC. MKS is under no obligation to,
and expressly disclaims any obligation to, update or alter these
forward-looking statements, whether as a result of new information,
future events or otherwise after the date of this press release.
Amounts reported in this press release are preliminary and subject
to finalization prior to the filing of our Quarterly Report on Form
10-Q for the quarter ended June 30, 2023.
Company Contact: David RyzhikVice President,
Investor RelationsTelephone: (978) 557-5180Email:
david.ryzhik@mksinst.com
|
MKS
Instruments, Inc. |
Unaudited
Consolidated Statements of Operations |
(In
millions, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
March 31, |
|
June 30, |
|
June 30, |
|
June 30, |
|
2023 |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Net revenues: |
|
|
|
|
|
|
|
|
|
Products |
$ |
885 |
|
|
$ |
712 |
|
|
$ |
664 |
|
|
$ |
1,597 |
|
|
$ |
1,312 |
|
Services |
|
118 |
|
|
|
82 |
|
|
|
101 |
|
|
|
200 |
|
|
|
195 |
|
Total net revenues |
|
1,003 |
|
|
|
794 |
|
|
|
765 |
|
|
|
1,797 |
|
|
|
1,507 |
|
Cost of revenues: |
|
|
|
|
|
|
|
|
|
Products |
|
470 |
|
|
|
409 |
|
|
|
377 |
|
|
|
878 |
|
|
|
737 |
|
Services |
|
63 |
|
|
|
50 |
|
|
|
50 |
|
|
|
113 |
|
|
|
98 |
|
Total cost of revenues (exclusive of amortization shown separately
below) |
|
533 |
|
|
|
459 |
|
|
|
427 |
|
|
|
991 |
|
|
|
835 |
|
Gross profit |
|
470 |
|
|
|
335 |
|
|
|
338 |
|
|
|
806 |
|
|
|
672 |
|
Research and development |
|
75 |
|
|
|
72 |
|
|
|
53 |
|
|
|
147 |
|
|
|
105 |
|
Selling, general and administrative |
|
172 |
|
|
|
174 |
|
|
|
101 |
|
|
|
348 |
|
|
|
193 |
|
Acquisition and integration costs |
|
5 |
|
|
|
6 |
|
|
|
2 |
|
|
|
11 |
|
|
|
10 |
|
Restructuring |
|
11 |
|
|
|
1 |
|
|
|
3 |
|
|
|
12 |
|
|
|
5 |
|
Amortization of intangible assets |
|
76 |
|
|
|
81 |
|
|
|
15 |
|
|
|
157 |
|
|
|
30 |
|
Goodwill and intangible asset impairments |
|
1,827 |
|
|
|
— |
|
|
|
— |
|
|
|
1,827 |
|
|
|
— |
|
Gain on sale of long-lived assets |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7 |
) |
(Loss) income from operations |
|
(1,696 |
) |
|
|
1 |
|
|
|
164 |
|
|
|
(1,696 |
) |
|
|
336 |
|
Interest income |
|
(4 |
) |
|
|
(3 |
) |
|
|
(1 |
) |
|
|
(7 |
) |
|
|
(1 |
) |
Interest expense |
|
88 |
|
|
|
85 |
|
|
|
7 |
|
|
|
173 |
|
|
|
13 |
|
Other expense (income), net |
|
11 |
|
|
|
(2 |
) |
|
|
2 |
|
|
|
9 |
|
|
|
(3 |
) |
(Loss) income before income taxes |
|
(1,791 |
) |
|
|
(79 |
) |
|
|
156 |
|
|
|
(1,871 |
) |
|
|
327 |
|
(Benefit) provision for income taxes |
|
(22 |
) |
|
|
(37 |
) |
|
|
26 |
|
|
|
(59 |
) |
|
|
54 |
|
Net (loss) income |
$ |
(1,769 |
) |
|
$ |
(42 |
) |
|
$ |
130 |
|
|
$ |
(1,812 |
) |
|
$ |
273 |
|
Net (loss) income per share: |
|
|
|
|
|
|
|
|
|
Basic |
$ |
(26.47 |
) |
|
$ |
(0.64 |
) |
|
$ |
2.33 |
|
|
$ |
(27.14 |
) |
|
$ |
4.90 |
|
Diluted |
$ |
(26.47 |
) |
|
$ |
(0.64 |
) |
|
$ |
2.32 |
|
|
$ |
(27.14 |
) |
|
$ |
4.89 |
|
Cash dividend per common share |
$ |
0.22 |
|
|
$ |
0.22 |
|
|
$ |
0.22 |
|
|
$ |
0.44 |
|
|
$ |
0.44 |
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
Basic |
|
66.8 |
|
|
|
66.7 |
|
|
|
55.7 |
|
|
|
66.8 |
|
|
|
55.6 |
|
Diluted |
|
66.8 |
|
|
|
66.7 |
|
|
|
55.8 |
|
|
|
66.8 |
|
|
|
55.8 |
|
|
MKS
Instruments, Inc. |
Unaudited
Consolidated Balance Sheet |
(In
millions) |
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
2023 |
|
2022 |
|
|
|
|
|
ASSETS |
|
|
|
|
Cash and cash equivalents |
|
$ |
757 |
|
|
$ |
909 |
Short-term investments |
|
|
1 |
|
|
|
1 |
Accounts receivable, net |
|
|
631 |
|
|
|
720 |
Inventories |
|
|
1,036 |
|
|
|
977 |
Other current assets |
|
|
303 |
|
|
|
187 |
Total current assets |
|
|
2,728 |
|
|
|
2,794 |
Property, plant and equipment, net |
|
|
777 |
|
|
|
800 |
Right-of-use assets, net |
|
|
237 |
|
|
|
234 |
Goodwill |
|
|
2,575 |
|
|
|
4,308 |
Intangible assets, net |
|
|
2,728 |
|
|
|
3,173 |
Other assets |
|
|
185 |
|
|
|
186 |
Total assets |
|
$ |
9,230 |
|
|
$ |
11,495 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
Short-term debt |
|
$ |
88 |
|
|
$ |
93 |
Accounts payable |
|
|
314 |
|
|
|
426 |
Other current liabilities |
|
|
433 |
|
|
|
433 |
Total current liabilities |
|
|
835 |
|
|
|
952 |
Long-term debt, net |
|
|
4,819 |
|
|
|
4,834 |
Non-current deferred taxes |
|
|
628 |
|
|
|
783 |
Non-current accrued compensation |
|
|
143 |
|
|
|
138 |
Non-current lease liabilities |
|
|
217 |
|
|
|
215 |
Other liabilities |
|
|
93 |
|
|
|
90 |
Total liabilities |
|
|
6,735 |
|
|
|
7,012 |
Stockholders' equity |
|
|
|
|
Common stock |
|
|
— |
|
|
|
— |
Additional paid-in capital |
|
|
2,168 |
|
|
|
2,142 |
Retained earnings |
|
|
431 |
|
|
|
2,272 |
Accumulated other comprehensive (loss) income |
|
|
(104 |
) |
|
|
69 |
Total stockholders' equity |
|
|
2,495 |
|
|
|
4,483 |
Total liabilities and stockholders' equity |
|
$ |
9,230 |
|
|
$ |
11,495 |
|
MKS
Instruments, Inc. |
Unaudited
Consolidated Statements of Cash Flows |
(In
millions) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
March 31, |
|
June 30, |
|
June 30, |
|
June 30, |
|
2023 |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
Net (loss) income |
$ |
(1,769 |
) |
|
$ |
(42 |
) |
|
$ |
130 |
|
|
$ |
(1,812 |
) |
|
$ |
273 |
|
Adjustments to reconcile net (loss) income to net cash (used in)
provided by operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
101 |
|
|
|
107 |
|
|
|
28 |
|
|
|
208 |
|
|
|
56 |
|
Goodwill and intangible asset impairments |
|
1,827 |
|
|
|
— |
|
|
|
— |
|
|
|
1,827 |
|
|
|
— |
|
Unrealized loss on derivatives not designated as hedging
instruments |
|
6 |
|
|
|
13 |
|
|
|
4 |
|
|
|
20 |
|
|
|
7 |
|
Amortization of debt issuance costs and original issue
discounts |
|
7 |
|
|
|
8 |
|
|
|
— |
|
|
|
15 |
|
|
|
— |
|
Gain on sale of long-lived assets |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7 |
) |
Stock-based compensation |
|
13 |
|
|
|
18 |
|
|
|
13 |
|
|
|
31 |
|
|
|
21 |
|
Provision for excess and obsolete inventory |
|
12 |
|
|
|
18 |
|
|
|
3 |
|
|
|
30 |
|
|
|
7 |
|
Deferred income taxes |
|
(109 |
) |
|
|
(10 |
) |
|
|
— |
|
|
|
(120 |
) |
|
|
(2 |
) |
Other |
|
1 |
|
|
|
— |
|
|
|
2 |
|
|
|
1 |
|
|
|
2 |
|
Changes in operating assets and liabilities, net of acquired assets
and liabilities |
|
(148 |
) |
|
|
(75 |
) |
|
|
(75 |
) |
|
|
(222 |
) |
|
|
(211 |
) |
Net cash (used in) provided by operating activities |
|
(59 |
) |
|
|
37 |
|
|
|
105 |
|
|
|
(22 |
) |
|
|
146 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
Purchases of investments |
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
Maturities of investments |
|
— |
|
|
|
— |
|
|
|
41 |
|
|
|
— |
|
|
|
76 |
|
Proceeds from sale of long-lived assets |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
7 |
|
Purchases of property, plant and equipment |
|
(18 |
) |
|
|
(17 |
) |
|
|
(64 |
) |
|
|
(35 |
) |
|
|
(83 |
) |
Net cash used in investing activities |
|
(18 |
) |
|
|
(17 |
) |
|
|
(24 |
) |
|
|
(34 |
) |
|
|
(1 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
Proceeds from borrowings |
|
— |
|
|
|
2 |
|
|
|
3 |
|
|
|
1 |
|
|
|
6 |
|
Payments of borrowings |
|
(22 |
) |
|
|
(23 |
) |
|
|
(6 |
) |
|
|
(45 |
) |
|
|
(8 |
) |
Dividend payments |
|
(15 |
) |
|
|
(15 |
) |
|
|
(12 |
) |
|
|
(29 |
) |
|
|
(24 |
) |
Net proceeds (payments) related to employee stock awards |
|
1 |
|
|
|
(6 |
) |
|
|
1 |
|
|
|
(5 |
) |
|
|
(5 |
) |
Other financing activities |
|
1 |
|
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net cash used in financing activities |
|
(35 |
) |
|
|
(43 |
) |
|
|
(14 |
) |
|
|
(78 |
) |
|
|
(31 |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
(11 |
) |
|
|
(6 |
) |
|
|
(13 |
) |
|
|
(18 |
) |
|
|
(15 |
) |
(Decrease) increase in cash and cash equivalents |
|
(123 |
) |
|
|
(29 |
) |
|
|
54 |
|
|
|
(152 |
) |
|
|
99 |
|
Cash and cash equivalents at beginning of period |
|
880 |
|
|
|
909 |
|
|
|
1,011 |
|
|
|
909 |
|
|
|
966 |
|
Cash and cash equivalents at end of period |
$ |
757 |
|
|
$ |
880 |
|
|
$ |
1,065 |
|
|
$ |
757 |
|
|
$ |
1,065 |
|
|
|
|
|
|
|
|
|
|
|
The following
supplemental Non-GAAP earnings information is presented to aid in
understanding MKS’ operating results: |
|
|
|
|
|
|
|
|
|
|
MKS
Instruments, Inc. |
Schedule
Reconciling Selected Non-GAAP Financial Measures |
(In
millions, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
March 31, |
|
June 30, |
|
June 30, |
|
June 30, |
|
2023 |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Net (loss) income |
$ |
(1,769 |
) |
|
$ |
(42 |
) |
|
$ |
130 |
|
|
$ |
(1,812 |
) |
|
$ |
273 |
|
Acquisition and integration costs (Note 1) |
|
5 |
|
|
|
6 |
|
|
|
2 |
|
|
|
11 |
|
|
|
10 |
|
Restructuring (Note 2) |
|
11 |
|
|
|
1 |
|
|
|
3 |
|
|
|
12 |
|
|
|
5 |
|
Goodwill and intangible asset impairments (Note 3) |
|
1,827 |
|
|
|
— |
|
|
|
— |
|
|
|
1,827 |
|
|
|
— |
|
Amortization of debt issuance costs (Note 4) |
|
5 |
|
|
|
6 |
|
|
|
— |
|
|
|
11 |
|
|
|
— |
|
Ransomware incident (Note 5) |
|
4 |
|
|
|
7 |
|
|
|
— |
|
|
|
11 |
|
|
|
— |
|
Gain on sale of long-lived assets (Note 6) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7 |
) |
Currency hedge gain (Note 7) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5 |
) |
Amortization of intangible assets |
|
76 |
|
|
|
81 |
|
|
|
15 |
|
|
|
157 |
|
|
|
30 |
|
Windfall tax expense (benefit) on stock-based compensation (Note
8) |
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
(1 |
) |
Foreign tax rate adjustment (Note 9) |
|
— |
|
|
|
(3 |
) |
|
|
— |
|
|
|
(2 |
) |
|
|
Tax effect of Non-GAAP adjustments (Note 10) |
|
(72 |
) |
|
|
(24 |
) |
|
|
(5 |
) |
|
|
(96 |
) |
|
|
(9 |
) |
Non-GAAP net earnings |
$ |
88 |
|
|
$ |
32 |
|
|
$ |
145 |
|
|
$ |
120 |
|
|
$ |
296 |
|
Non-GAAP net earnings per diluted share |
$ |
1.32 |
|
|
$ |
0.48 |
|
|
$ |
2.59 |
|
|
$ |
1.80 |
|
|
$ |
5.31 |
|
Weighted average diluted shares outstanding |
|
67.0 |
|
|
|
66.8 |
|
|
|
55.8 |
|
|
|
66.9 |
|
|
|
55.8 |
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities |
$ |
(59 |
) |
|
$ |
37 |
|
|
$ |
105 |
|
|
$ |
(22 |
) |
|
$ |
146 |
|
Purchases of property, plant and equipment |
|
(18 |
) |
|
|
(17 |
) |
|
|
(64 |
) |
|
|
(35 |
) |
|
|
(83 |
) |
Free cash flow |
$ |
(77 |
) |
|
$ |
20 |
|
|
$ |
41 |
|
|
$ |
(57 |
) |
|
$ |
63 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MKS
Instruments, Inc. |
Schedule
Reconciling Selected Non-GAAP Financial Measures |
(In
millions) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
March 31, |
|
June 30, |
|
June 30, |
|
June 30, |
|
2023 |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
GAAP and Non-GAAP gross profit |
$ |
470 |
|
|
$ |
335 |
|
|
$ |
338 |
|
|
$ |
806 |
|
|
$ |
672 |
|
GAAP and Non-GAAP gross margin |
|
46.9 |
% |
|
|
42.2 |
% |
|
|
44.2 |
% |
|
|
44.8 |
% |
|
|
44.6 |
% |
Operating expenses |
$ |
2,166 |
|
|
$ |
334 |
|
|
$ |
174 |
|
|
$ |
2,502 |
|
|
$ |
336 |
|
Acquisition and integration costs (Note 1) |
|
5 |
|
|
|
6 |
|
|
|
2 |
|
|
|
11 |
|
|
|
10 |
|
Restructuring (Note 2) |
|
11 |
|
|
|
1 |
|
|
|
3 |
|
|
|
12 |
|
|
|
5 |
|
Goodwill and intangible asset impairments (Note 3) |
|
1,827 |
|
|
|
— |
|
|
|
— |
|
|
|
1,827 |
|
|
|
— |
|
Ransomware incident (Note 5) |
|
4 |
|
|
|
7 |
|
|
|
— |
|
|
|
11 |
|
|
|
— |
|
Gain on sale of long-lived assets (Note 6) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7 |
) |
Amortization of intangible assets |
|
76 |
|
|
|
81 |
|
|
|
15 |
|
|
|
157 |
|
|
|
30 |
|
Non-GAAP operating expenses |
$ |
243 |
|
|
$ |
240 |
|
|
$ |
154 |
|
|
$ |
484 |
|
|
$ |
298 |
|
(Loss) income from operations |
$ |
(1,696 |
) |
|
$ |
1 |
|
|
$ |
164 |
|
|
$ |
(1,696 |
) |
|
$ |
336 |
|
Operating margin |
|
(169.1 |
%) |
|
|
0.1 |
% |
|
|
21.5 |
% |
|
|
(94.3 |
%) |
|
|
22.3 |
% |
Acquisition and integration costs (Note 1) |
|
5 |
|
|
|
6 |
|
|
|
2 |
|
|
|
11 |
|
|
|
10 |
|
Restructuring (Note 2) |
|
11 |
|
|
|
1 |
|
|
|
3 |
|
|
|
12 |
|
|
|
5 |
|
Goodwill and intangible asset impairments (Note 3) |
|
1,827 |
|
|
|
— |
|
|
|
— |
|
|
|
1,827 |
|
|
|
— |
|
Ransomware incident (Note 5) |
|
4 |
|
|
|
7 |
|
|
|
— |
|
|
|
11 |
|
|
|
— |
|
Gain on sale of long-lived assets (Note 6) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7 |
) |
Amortization of intangible assets |
|
76 |
|
|
|
81 |
|
|
|
15 |
|
|
|
157 |
|
|
|
30 |
|
Non-GAAP income from operations |
$ |
227 |
|
|
$ |
96 |
|
|
$ |
184 |
|
|
$ |
322 |
|
|
$ |
374 |
|
Non-GAAP operating margin |
|
22.6 |
% |
|
|
12.1 |
% |
|
|
24.1 |
% |
|
|
17.9 |
% |
|
|
24.8 |
% |
Interest expense, net |
|
84 |
|
|
|
82 |
|
|
|
6 |
|
|
|
166 |
|
|
|
12 |
|
Amortization of debt issuance costs (Note 4) |
|
5 |
|
|
|
6 |
|
|
|
— |
|
|
|
11 |
|
|
|
— |
|
Non-GAAP interest expense, net |
|
79 |
|
|
|
76 |
|
|
|
6 |
|
|
|
155 |
|
|
|
12 |
|
Net (loss) income |
$ |
(1,769 |
) |
|
$ |
(42 |
) |
|
$ |
130 |
|
|
$ |
(1,812 |
) |
|
$ |
273 |
|
Interest expense, net |
|
84 |
|
|
|
82 |
|
|
|
6 |
|
|
|
166 |
|
|
|
12 |
|
(Benefit) provision for income taxes |
|
(22 |
) |
|
|
(37 |
) |
|
|
26 |
|
|
|
(59 |
) |
|
|
54 |
|
Depreciation |
|
25 |
|
|
|
26 |
|
|
|
13 |
|
|
|
51 |
|
|
|
26 |
|
Amortization of intangible assets |
|
76 |
|
|
|
81 |
|
|
|
15 |
|
|
|
157 |
|
|
|
30 |
|
EBITDA |
$ |
(1,606 |
) |
|
$ |
110 |
|
|
$ |
190 |
|
|
$ |
(1,497 |
) |
|
$ |
395 |
|
Stock-based compensation |
|
13 |
|
|
|
18 |
|
|
|
13 |
|
|
|
31 |
|
|
|
21 |
|
Acquisition and integration costs (Note 1) |
|
5 |
|
|
|
6 |
|
|
|
2 |
|
|
|
11 |
|
|
|
10 |
|
Restructuring (Note 2) |
|
11 |
|
|
|
1 |
|
|
|
3 |
|
|
|
12 |
|
|
|
5 |
|
Goodwill and intangible asset impairments (Note 3) |
|
1,827 |
|
|
|
— |
|
|
|
— |
|
|
|
1,827 |
|
|
|
— |
|
Ransomware incident (Note 5) |
|
4 |
|
|
|
7 |
|
|
|
— |
|
|
|
11 |
|
|
|
— |
|
Gain on sale of long-lived assets (Note 6) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7 |
) |
Currency hedge gain (Note 7) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5 |
) |
Adjusted EBITDA |
$ |
254 |
|
|
$ |
142 |
|
|
$ |
208 |
|
|
$ |
395 |
|
|
$ |
419 |
|
Adjusted EBITDA margin |
|
25.3 |
% |
|
|
17.8 |
% |
|
|
27.2 |
% |
|
|
22.0 |
% |
|
|
27.8 |
% |
|
MKS
Instruments, Inc. |
Reconciliation of GAAP Income Tax Rate to Non-GAAP Income
Tax Rate |
(In
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2023 |
|
Three Months Ended March 31, 2023 |
|
|
(Loss) Income Before Income Taxes |
|
(Benefit) Provision for Income Taxes |
|
Effective Tax Rate |
|
(Loss) Income Before Income Taxes |
|
Benefitfor Income Taxes |
|
Effective Tax Rate |
GAAP |
|
$ |
(1,791 |
) |
|
$ |
(22 |
) |
|
1.2 |
% |
|
$ |
(79 |
) |
|
$ |
(37 |
) |
|
46.6 |
% |
Acquisition and integration costs (Note 1) |
|
|
5 |
|
|
|
— |
|
|
|
|
|
6 |
|
|
|
— |
|
|
|
Restructuring (Note 2) |
|
|
11 |
|
|
|
— |
|
|
|
|
|
1 |
|
|
|
— |
|
|
|
Goodwill and intangible asset impairments (Note 3) |
|
|
1,827 |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
Amortization of debt issuance costs (Note 4) |
|
|
5 |
|
|
|
— |
|
|
|
|
|
6 |
|
|
|
— |
|
|
|
Ransomware incident (Note 5) |
|
|
4 |
|
|
|
— |
|
|
|
|
|
7 |
|
|
|
— |
|
|
|
Amortization of intangible assets |
|
|
76 |
|
|
|
— |
|
|
|
|
|
81 |
|
|
|
— |
|
|
|
Windfall tax expense (benefit) on stock-based compensation (Note
8) |
|
|
— |
|
|
|
(1 |
) |
|
|
|
|
— |
|
|
|
— |
|
|
|
Foreign tax rate adjustment (Note 9) |
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
3 |
|
|
|
Tax effect of Non-GAAP adjustments (Note 10) |
|
|
— |
|
|
|
72 |
|
|
|
|
|
— |
|
|
|
24 |
|
|
|
Non-GAAP |
|
$ |
137 |
|
|
$ |
49 |
|
|
35.5 |
% |
|
$ |
23 |
|
|
$ |
(10 |
) |
|
(46.8 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2022 |
|
|
|
|
|
|
|
|
Income Before Income Taxes |
|
Provision for Income Taxes |
|
Effective Tax Rate |
GAAP |
|
|
|
|
|
|
|
$ |
156 |
|
|
$ |
26 |
|
|
17.0 |
% |
Acquisition and integration costs (Note 1) |
|
|
|
|
|
|
|
|
2 |
|
|
|
— |
|
|
|
Restructuring (Note 2) |
|
|
|
|
|
|
|
|
3 |
|
|
|
— |
|
|
|
Amortization of intangible assets |
|
|
|
|
|
|
|
|
15 |
|
|
|
— |
|
|
|
Tax effect of Non-GAAP adjustments (Note 10) |
|
|
|
|
|
|
|
|
— |
|
|
|
5 |
|
|
|
Non-GAAP |
|
|
|
|
|
|
|
$ |
176 |
|
|
$ |
31 |
|
|
18.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2023 |
|
Six Months Ended June 30, 2022 |
|
|
(Loss) Income Before Income Taxes |
|
(Benefit) Provisionfor Income Taxes |
|
Effective Tax Rate |
|
Income BeforeIncome Taxes |
|
Provisionfor Income Taxes |
|
Effective Tax Rate |
GAAP |
|
$ |
(1,871 |
) |
|
$ |
(59 |
) |
|
3.2 |
% |
|
$ |
327 |
|
|
$ |
54 |
|
|
16.6 |
% |
Acquisition and integration costs (Note 1) |
|
|
11 |
|
|
|
— |
|
|
|
|
|
10 |
|
|
|
— |
|
|
|
Restructuring (Note 2) |
|
|
12 |
|
|
|
— |
|
|
|
|
|
5 |
|
|
|
— |
|
|
|
Goodwill and intangible asset impairments (Note 3) |
|
|
1,827 |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
Amortization of debt issuance costs (Note 4) |
|
|
11 |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
Ransomware incident (Note 5) |
|
|
11 |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
Gain on sale of long-lived assets (Note 6) |
|
|
— |
|
|
|
— |
|
|
|
|
|
(7 |
) |
|
|
— |
|
|
|
Currency hedge gain (Note 7) |
|
|
— |
|
|
|
— |
|
|
|
|
|
(5 |
) |
|
|
|
|
Amortization of intangible assets |
|
|
157 |
|
|
|
— |
|
|
|
|
|
30 |
|
|
|
— |
|
|
|
Windfall tax expense (benefit) on stock-based compensation (Note
8) |
|
|
— |
|
|
|
(1 |
) |
|
|
|
|
— |
|
|
|
1 |
|
|
|
Foreign tax rate adjustment (Note 9) |
|
|
— |
|
|
|
2 |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
Tax effect of Non-GAAP adjustments (Note 10) |
|
|
— |
|
|
|
96 |
|
|
|
|
|
— |
|
|
|
9 |
|
|
|
Non-GAAP |
|
$ |
158 |
|
|
$ |
38 |
|
|
24.2 |
% |
|
$ |
360 |
|
|
$ |
64 |
|
|
18.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MKS Instruments,
Inc.Notes on Our Non-GAAP Financial
Information
Non-GAAP financial measures adjust GAAP financial measures for
the items listed below. These Non-GAAP financial measures should be
viewed in addition to, and not as a substitute for, MKS’ reported
GAAP results, and may be different from Non-GAAP financial measures
used by other companies. In addition, these Non-GAAP financial
measures are not based on any comprehensive set of accounting rules
or principles. MKS management believes the presentation of these
Non-GAAP financial measures is useful to investors for comparing
prior periods and analyzing ongoing business trends and operating
results. Totals presented may not sum and percentages may not
recalculate using figures presented due to rounding.
Note 1: Acquisition and integration costs primarily related to
the Atotech Acquisition.
Note 2: Restructuring costs during the three and six months
ended June 30, 2023 and the three months ended March 31, 2023,
primarily related to severance costs due to global cost-saving
initiatives. Restructuring costs during the three and six months
ended June 30, 2022 primarily related to severance costs due
to a global cost-saving initiative and the closure of two
facilities in Europe.
Note 3: During the three months ended June 30, 2023, we noted
softer industry demand, particularly in the personal computer and
smartphone markets and concluded there was a triggering event at
our Materials Solutions Division, which represents the former
Atotech business, and Equipment Solutions Business, which
represents the former Electro Scientific Industries business and is
a reporting unit of our Photonics Solutions Division. We performed
a quantitative assessment which resulted in an impairment of $1.3
billion for our Materials Solutions Division and $0.5 billion for
our Equipment Solutions Business.
Note 4: We recorded additional interest expense related to the
amortization of debt issuance costs associated with our term loan
facility.
Note 5: We recorded costs, net of recoveries, associated with
the ransomware incident we identified on February 3, 2023. These
costs were primarily comprised of various third-party consulting
services, including forensic experts, restoration experts, legal
counsel, and other information technology and accounting
professional expenses, enhancements to our cybersecurity measures,
and costs to restore our systems and access our data.
Note 6: We recorded a gain on the sale of a minority interest
investment in a private company.
Note 7: We realized a gain from a euro currency contract used to
hedge our financing in connection with the Atotech Acquisition. The
contract expired on January 31, 2022.
Note 8: We recorded windfall tax expenses (benefits) on the
vesting of stock-based compensation.
Note 9: We recorded a reduction in benefit for income taxes for
a retrospective approval of an income tax rate reduction from a
foreign jurisdiction.
Note 10: Non-GAAP adjustments are tax effected at applicable
statutory rates resulting in a difference between the GAAP and
Non-GAAP tax rates.
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