MKS Instruments Reports Third Quarter 2018 Financial Results

ANDOVER, Mass., Oct. 23, 2018 (GLOBE NEWSWIRE) -- MKS Instruments, Inc. (NASDAQ: MKSI), a global provider of technologies that enable advanced processes and improve productivity, today reported third quarter 2018 financial results.

Quarterly Financial Results

(in millions, except per share data)

Q3 2018Q2 2018
GAAP Results
Net revenues$487$573
Gross margin47.6%48.0%
Operating margin24.0%26.4%
Net income$93$123
Diluted EPS$1.70$2.22
Non-GAAP Results
Gross margin47.6%48.0%
Operating margin26.5%28.3%
Net earnings$103$129
Diluted EPS$1.88$2.33

Third Quarter 2018 Financial Results

Revenue was $487 million, a decrease of 15% from a record of $573 million in the second quarter of 2018 and an increase of $1 million from $486 million in the third quarter of 2017.

Net income was $93 million, or $1.70 per diluted share, compared to net income of $123 million, or $2.22 per diluted share, in the second quarter of 2018, and $76 million, or $1.38 per diluted share, in the third quarter of 2017.

Non-GAAP net earnings, which exclude special charges and credits, were $103 million, or $1.88 per diluted share, compared to $129 million, or $2.33 per diluted share, in the second quarter of 2018, and $86 million, or $1.56 per diluted share, in the third quarter of 2017.

Sales in the Vacuum and Analysis Division were $286 million, a decrease of 7% from the third quarter a year ago, primarily due to moderation in semiconductor capital equipment spending. Sales in the Light and Motion Division were $201 million, an increase of 13% from the prior year period.

Sales to semiconductor customers were $259 million, a decrease of 8% compared to the third quarter of 2017, and sales to Advanced Markets were $228 million, an increase of 11% compared to the third quarter of 2017.

"Despite the recent moderation in the semiconductor market, we are pleased with our strong financial results for the third quarter, reflecting our ability to manage through these cycles," said Gerald Colella, Chief Executive Officer. "Although we foresee the semiconductor market will continue to face headwinds in the near term, exiting the third quarter we have seen that our semiconductor business has been more steady and consistent. We are very optimistic on the long-term growth drivers within the semiconductor market. Moreover, we have continued to diversify our markets, customers and product portfolio and are on target to grow our Advanced Markets more than two times faster than the overall market."

"The acquisition of Newport Corporation, which was completed two years ago, coupled with strong organic growth has continued to expand our portion of revenue from Advanced Markets," said Seth Bagshaw, Chief Financial Officer. "In the past five years, we have grown our Advanced Market revenue from approximately $211 million in 2013 to approaching over $900 million in 2018. Advanced Markets represented approximately 47% of consolidated revenue in the third quarter and year to date revenue increased almost 20% from the same period a year ago."

Additional Financial Information

The Company had $620 million in cash and short-term investments and $348 million of Term Loan Debt as of September 30, 2018. During the third quarter of 2018, the Company repurchased 818 thousand shares for $75 million at an average price of $91.67 per share and paid a dividend of $10.9 million or $0.20 cents per diluted share.

Fourth Quarter 2018 Outlook

Based on current business levels, the Company expects that revenue in the fourth quarter of 2018 could range from $420 to $460 million.

At these volumes, GAAP net income could range from $1.19 to $1.45 per diluted share and Non-GAAP net earnings could range from $1.38 to $1.64 per diluted share. This financial guidance incorporates assumptions made based upon the Company's current interpretation of the 2017 Tax Cuts 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, October 24, 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 4268689, 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, 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, environmental costs related to an acquisition, costs associated with the sale of a business, the one-time tax effects of the 2017 Tax Cuts and Jobs Act, windfall tax benefits from stock-based compensation, accrued taxes on subsidiary distributions, a tax adjustment related to the sale of a business and the related tax effects of adjustments impacting pre-tax income. 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.