MKS Instruments Reports Second Quarter 2018 Financial Results

  • Achieved new quarterly records for revenue and Non-GAAP net earnings
  • Achieved new quarterly record for revenue to the semiconductor market
  • Quarterly revenue up 19% compared to Q2 2017
  • Light and Motion Division achieves new Non-GAAP operating income record

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

Quarterly Financial Results
(in millions, except per share data)

Q2 2018 Q1 2018
GAAP Results
Net revenues $573 $554
Gross margin 48.0% 47.4%
Operating margin 26.4% 23.8%
Net income $123 $105
Diluted EPS $2.22 $1.90
Non-GAAP Results
Gross margin 48.0% 47.4%
Operating margin 28.3% 26.2%
Net earnings $129 $114.3
Diluted EPS $2.33 $2.07

Second Quarter 2018 Financial Results

Revenue was $573 million, an increase of 3% from $554 million in the first quarter of 2018 and an increase of 19% from $481 million in the second quarter of 2017.

Net income was $123 million, or $2.22 per diluted share, compared to net income of $105 million, or $1.90 per diluted share, in the first quarter of 2018, and $120.4 million, or $2.19 per diluted share, in the second quarter of 2017, which included a gain of $72 million from the sale of its Data Analytics Business Unit.

Non-GAAP net earnings, which exclude special charges and credits, were $129 million, or $2.33 per diluted share, compared to $114.3 million, or $2.07 per diluted share, in the first quarter of 2018, and $77.7 million, or $1.41 per diluted share, in the second quarter of 2017.

Sales to semiconductor customers were a record $336 million, an increase of 19% compared to the second quarter of 2017, and sales to Advanced Markets were $237 million, an increase of 19% compared to the second quarter of 2017.

Sales in the Vacuum and Analysis Division were $368 million, an increase of 19% from the second quarter a year ago. Sales in the Light and Motion Division were $205 million, an increase of 20% from the prior year period.

"We are very pleased with our results for the second quarter of 2018, as we achieved new records for total and semiconductor revenue as well as Non-GAAP net earnings," said Gerald Colella, Chief Executive Officer. "We set a strategy five years ago to augment our semi-focused business model with additional solutions that serve the industrial technology sector and other Advanced Markets. Our results demonstrate that this strategy is working, and we are confident that our diverse end markets, combined with our global leadership position in Semiconductor, will continue to drive sustainable and profitable growth for MKS."

"Since acquiring Newport Corporation two years ago, we have expanded the portion of our revenue from Advanced Markets from approximately 25% to over 40%, a nearly $1 billion annual run rate, based on second quarter revenue," said Seth Bagshaw, Chief Financial Officer. "At the same time, we more than doubled the Non-GAAP operating margin for our Light and Motion Division, from approximately 11% in the second quarter of 2016 to over 27% in the second quarter of 2018, demonstrating our ability to drive profitable growth."

Additional Financial Information

The Company had $631 million in cash and short-term investments and $348 million of Term Loan Debt as of June 30, 2018 and during the second quarter of 2018, MKS paid a dividend of $10.9 million or $0.20 per diluted share, an 11% increase over the previous quarter.

Third Quarter 2018 Outlook

Based on current business levels, the Company expects that revenue in the third quarter of 2018 could range from $470 to $510 million.

At these volumes, GAAP net income could range from $1.40 to $1.66 per diluted share and Non-GAAP net earnings could range from $1.60 to $1.86 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, July 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 4876837, 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.

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 for our customers. 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, power, reactive gas generation, vacuum technology, lasers, photonics, sub-micron positioning, vibration control and optics. We also provide services relating to the maintenance and repair of our products, installation services and training. Our primary served markets include semiconductor, industrial technologies, life and health sciences, research and defense. 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.

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.

Download the Unaudited Consolidated Statements of Operations here.