MKS Instruments Inc at JPMorgan Global Technology, Media and Communications Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Peter Peng - J.P. Morgan Securities LLC - Analyst : Okay. Why don't we just kind of start off with the near-term stuff on the tariffs because that's been very topical and top of investors' mind. So Liberation Day was just a month ago and your customers are facing numerous uncertainties. Some of them are spending in strategic spends less likely to get cut back such as no migrations, AI accelerated compute, but then there are other segments like industrial, automotive and the consumer-focused smartphone and PC that could likely get impacted by tariffs. I think you have a very unique vantage point, given that you have three different business segments. And so what have you kind of observed over the last several weeks in terms of your customer discussions? Any notable discrepancy among your customers in your different end markets?

Question: Peter Peng - J.P. Morgan Securities LLC - Analyst : And then just on the direct tariff costs. Your gross margin guidance includes 100 basis points of gross margin impact and it's primarily impacting your Vacuum business. If you can just kind of elaborate on what the assumptions you're making and then some of the near and longer-term REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 14, 2025 / 3:20PM, MKSI.OQ - MKS Instruments Inc at JPMorgan Global Technology, Media and Communications Conference mitigation strategies. And then I think earlier, one of your peers also talked about because of the recent trade easing that this could be a worst case scenario in terms of that. So are you seeing that as well?

Question: Peter Peng - J.P. Morgan Securities LLC - Analyst : Okay. Starting with your semiconductor business. Your large customers have largely reiterated their view of the mid-single-digit percentage WFE revenue outlook for 2025 kind of highlighting the strength in leading-edge foundry and logic, NAND technology upgrades and strong spending in advanced DRAM and HBM. Just kind of -- you historically highlighted a 200 basis points premium to WFE. Kind of based on your visibility and

Question: Peter Peng - J.P. Morgan Securities LLC - Analyst : On the NAND technology upgrade, your customers are starting to upgrade from 100-plus layers to 200-plus layers, eventually 400 layers, right? We're starting to see this drive an inflection in NAND WFE. How do you anticipate the trajectory of these upgrades, right? You have a pretty strong market leadership in RF power. And so maybe if you can just give us insight on how you're thinking about the technology upgrade for the year?

Question: Peter Peng - J.P. Morgan Securities LLC - Analyst : One of your lead customers just recently talked about for the 2/3 of the installed base that's still in the 100 layers to convert into 200 layers. That would drive a $40 billion of spending just to convert. And so maybe if you can just give us some qualitative or quantitative thoughts on how that would translate into MKSI.

Question: Peter Peng - J.P. Morgan Securities LLC - Analyst : Just relatedly, we get asked this question quite a bit. On the opportunities between just the upgrade and greenfield, how would you kind of compare the revenue opportunities between these two opportunity set?

Question: Peter Peng - J.P. Morgan Securities LLC - Analyst : Perfect. Let me just pause here to see if there's any questions. Unidentified Participant Yes. If I look at the trend of some of your customers Applied Materials, KLA, Lam, Tokyo Electron, they all seem to be focused on moving towards these more integrated systems, what Applied calls their system like integrated material systems where they're integrating multiple chambers, deposition, etch and so on. And in addition to that, they've got all this integrated metrology. I would think that that would be a pretty big benefit for the MKSI team because you've got so much more Vacuum requirements. You've got so much more RF requirements. You've got so much more metrology requirements and all being sort of optimize and integrated into the single system. Do you view that as sort of a content gain opportunity as you look at some of these next-generation opportunities?

Question: Peter Peng - J.P. Morgan Securities LLC - Analyst : Historically, you've been very strong in the dielectric etch market. I think at your last Analyst Day, you kind of discussed some penetration opportunities in the conductor etch market. Maybe you can just share your progress in this area.

Question: Peter Peng - J.P. Morgan Securities LLC - Analyst : One area that you've been gaining a lot of traction is in the process control and lithography application, right? Revenue has been growing at a 20% CAGR, and it's almost -- it's a $300 million revenue run rate business. Maybe just discuss some of the design win pipeline and share your perspective on how large this business can eventually get over time?

Question: Peter Peng - J.P. Morgan Securities LLC - Analyst : Got it. Okay. That's great. And so your mix of business have shifted over time. It was very memory-centric. And over time, I think given the kind of the weaker spending trends and some of the progress that you're making in the foundry and logic space is becoming more balanced. I think in the longer term, how do you think your mix is going to look like if memory WFE do rebound? Do you think it's more balanced over time? Or is it going to go back to historic?

Question: Peter Peng - J.P. Morgan Securities LLC - Analyst : Maybe switching to the Electronics & Packaging business. There's a lot of exciting growth in this area. We've highlighted back-end high bandwidth memory, AI compute servers, edge devices, the low earth orbit cell applications. Maybe you could just rank order the top 3 or 4 applications that you feel most excited and then what -- and how material are those to your overall business?

Question: Peter Peng - J.P. Morgan Securities LLC - Analyst : Maybe just following up on the three consecutive quarter, just positive booking trends in your chemistry equipment sales. You have a pretty high attach rate with the chemistry sales. Maybe you can just provide some insights into your customer buying patterns and what that might mean for your chemistry sales over the next several quarters? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 14, 2025 / 3:20PM, MKSI.OQ - MKS Instruments Inc at JPMorgan Global Technology, Media and Communications Conference

Question: Peter Peng - J.P. Morgan Securities LLC - Analyst : Moving on to the last business, the Specialty Industrial, which doesn't really get too much attention, right? It's a pretty well-diversified business encompassing defense, health care, automotive and just broader industrial markets and it's free cash flow generative. And so you talked about the kind of the macro impact, impacting some of the softness in the industrial and auto. So what sign or metrics are you -- need to see before you can kind of call a bottom and a recovery in this business?

Question: Peter Peng - J.P. Morgan Securities LLC - Analyst : Okay. So on the financial side, there's some OpEx step-up in 2025 as you kind of focus on some of these longer-term growth initiatives. Maybe if you can just elaborate on some of these longer-term projects and what you're targeting or specific applications? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 14, 2025 / 3:20PM, MKSI.OQ - MKS Instruments Inc at JPMorgan Global Technology, Media and Communications Conference

Question: Peter Peng - J.P. Morgan Securities LLC - Analyst : You guys done a pretty great job of deleveraging and actively repaying debt, refinancing your term loan. Just given the uncertainty in the macro environment do you -- how are you thinking about debt pay down? And is that 2.0 net leverage ratio, something that's still achievable over the next several years?

Question: Peter Peng - J.P. Morgan Securities LLC - Analyst : Perfect. We're out of time and that wraps up the session. Thank you gentlemen for participating.