MKS Instruments Reports First Quarter 2018 Financial Results

  • Achieved new quarterly records for revenue and Non-GAAP net earnings
  • Quarterly revenue up 27% compared to Q1 2017
  • Achieved new quarterly revenue records in both the Vacuum and Analysis and Light and Motion Divisions
  • Completed 4th Term Loan repricing and another $50 million voluntary debt prepayment

ANDOVER, Mass., April 24, 2018 (GLOBE NEWSWIRE) -- MKS Instruments, Inc. (NASDAQ:MKSI), a global provider of technologies that enable advanced processes and improve productivity, today reported first quarter 2018 financial results.

First Quarter 2018 Financial Results

Revenue was $554 million, an increase of 8% from $512 million in the fourth quarter of 2017 and an increase of 27% from $437 million in the first quarter of 2017.

Net income was $105 million, or $1.90 per diluted share, compared to net income of $77.6 million, or $1.41 per diluted share, in the fourth quarter of 2017, and $65.1 million, or $1.18 per diluted share, in the first quarter of 2017.

Non-GAAP net earnings, which exclude special charges and credits, were $114.3 million, or $2.07 per diluted share, compared to $94.6 million, or $1.71 per diluted share, in the fourth quarter of 2017, and $70.0 million, or $1.27 per diluted share, in the first quarter of 2017.

Sales to semiconductor customers were $313 million, an increase of 26% compared to the first quarter of 2017, and sales to advanced markets were $241 million, an increase of 28% compared to the first quarter of 2017.

Sales in the Vacuum and Analysis Division set another quarterly record of $348 million, an increase of 25% from the first quarter a year ago. Sales in the Light and Motion Division also set another quarterly record of $206 million, an increase of 29% from the prior year period.

"We are very pleased with our strong start in 2018, which has fueled our ability to achieve our objectives of sustainable and profitable growth," said Gerald Colella, Chief Executive Officer and President. Mr. Colella added, "We again set new records for quarterly revenue and Non-GAAP net earnings as well as achieving new revenue records in both the semiconductor market and advanced markets we serve. Our strong focus on solving complex customer problems is a significant driver in the 28% year over year revenue growth in our advanced markets. These advanced markets represent almost 45% of our total revenue and provide MKS a unique additive growth opportunity to our strong leading position in the semiconductor market."

"We also continue to execute on our strategy to delever our balance sheet and significantly reduce our interest cost," said Seth Bagshaw, Senior Vice President and Chief Financial Officer. "In March 2018, we voluntarily pre-paid another $50 million of principal on our Term Loan. Furthermore, on April 11, 2018, we completed our fourth successful repricing of our Term Loan. Our debt balance as of March 31, 2018, was $348 million, down from $780 million at loan origination in April 2016; our debt to Adjusted EBITDA ratio is well below one times; and we have reduced our non-GAAP interest expense by over 70% since origination on an annualized basis."

Additional Financial Information

The Company had $542 million in cash and short-term investments as of March 31, 2018 and during the first quarter of 2018, MKS paid a dividend of $9.8 million or $0.18 per diluted share.

Second Quarter 2018 Outlook

Based on current business levels, the Company expects that revenue in the second quarter of 2018 could range from $550 to $590 million.

At these volumes, GAAP net income could range from $1.91 to $2.18 per diluted share and non-GAAP net earnings could range from $2.09 to $2.36 per diluted share. This financial guidance incorporates assumptions made based upon the Company’s current interpretation of the 2017 Tax Cut and Jobs Act, and may change as additional clarification and implementation guidance is issued.

Conference Call Details

A conference call with management will be held on Wednesday, April 25, 2018 at 8:30 a.m. (Eastern Time). To participate in the conference call, please dial (877) 212-6076 for domestic callers and (707) 287-9331 for international callers, and an operator will connect you. Participants will need to provide the operator with the Conference ID of 8173829, which has been reserved for this call. A live and archived webcast of the call will be available on the Company’s website at www.mksinst.com, along with the Company's earnings press release and supplemental financial information.

Unaudited Consolidated Statements of Operations

About MKS Instruments
MKS Instruments, Inc. is a global provider of instruments, subsystems and process control solutions that measure, monitor, deliver, analyze, power, and control critical parameters of advanced manufacturing processes to improve process performance and productivity. Our products are derived from our core competencies in pressure measurement and control, flow measurement and control, gas and vapor delivery, gas composition analysis, residual gas analysis, leak detection, control technology, ozone generation and delivery, RF & DC power, reactive gas generation, vacuum technology, lasers, photonics, sub-micron positioning, vibration control, and optics. Our primary served markets include semiconductor capital equipment, general industrial, life sciences, and research. Additional information can be found at www.mksinst.com.

Use of Non-GAAP Financial Results
This release includes measures that are not in accordance with U.S. generally accepted accounting principles ("non-GAAP measures"). Non-GAAP measures exclude amortization of acquired intangible assets, asset impairments, costs associated with completed and announced acquisitions, acquisition integration costs, an inventory step-up adjustment related to an acquisition, restructuring charges, certain excess and obsolete inventory charges, fees and expenses related to the re-pricings of our term loan, amortization of debt issuance costs, net proceeds from an insurance policy, costs associated with the sale of a business, the tax effect of the 2017 Tax Cut and Jobs Act, the tax effect of legal entity restructurings, other discrete tax benefits and charges, and the related tax effect of these adjustments. These non-GAAP measures should be viewed in addition to, and not as a substitute for, MKS’ reported results, and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. MKS management believes the presentation of these non-GAAP measures is useful to investors for comparing prior periods and analyzing ongoing business trends and operating results. Annualized GAAP interest expense based upon $780 million principal outstanding and using the LIBOR based interest rate spread in effect on April 29, 2016, was $44 million and included $5 million in debt issuance cost. Annualized GAAP interest expense based upon $348 million in principal currently outstanding and LIBOR plus 175 basis points is $14.5 million and includes $3.1 million of debt issuance cost.

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the future financial performance, business prospects and growth of MKS. These statements are only predictions based on current assumptions and expectations. 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 are the conditions affecting the markets in which MKS operates, including the fluctuations in capital spending in the semiconductor industry and other advanced manufacturing markets, fluctuations in net sales to our major customers, the challenges, risks and costs involved with integrating the operations of the companies we have acquired, including our most recent acquisition of Newport Corporation, the Company’s ability to successfully grow our business, potential fluctuations in quarterly results, the terms of our term loan, dependence on new product development, rapid technological and market change, acquisition strategy, manufacturing and sourcing risks, volatility of stock price, international operations, financial risk management, and the other factors described in MKS’ most recent Annual Report on Form 10-K for the year ended December 31, 2017 filed with 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.