MKS Instruments Inc Q3 2024 Earnings Call Transcript

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

Question: Matthew Prisco - Cantor Fitzgerald & Co. - Analyst : I guess maybe to start, on your semiconductors business, can you maybe add some more color on what you're seeing in terms of customer utilization rates, spare business, ordering patterns or anything else that may help inform an early view into 2025 dynamics?

Question: Matthew Prisco - Cantor Fitzgerald & Co. - Analyst : Great. That's helpful. And then I would love to hear a little bit more color on your progress in the photonics initiatives. And then also given the pushouts experienced by your largest litho player, how does this change your ramp expectations around your new photonics win and subsequent duration of that margin headwind?

Question: Steve Barger - KeyBanc Capital Markets Inc. - Analyst : At the -- looking at the guidance at the midpoint, gross margin steps down about 120 basis points sequentially. Is that mix? Or can you talk through what the swing factors are around that range?

Question: Steve Barger - KeyBanc Capital Markets Inc. - Analyst : Got it. So, encouraging, but a little lower margin on the equipment. That's good. And maybe a question for Ram. You're coming into a situation where end markets are recovering, but there's still some uncertainty. How are you going to balance cost control versus the market share initiatives REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 1:30PM, MKSI.OQ - Q3 2024 MKS Instruments Inc Earnings Call that we're talking about, inventory levels, just to make sure that service levels are high? Maybe just talk about what you're prioritizing as you go through the next few quarters?

Question: Vijay Rakesh - Mizuho Securities USA - Analyst : Just a couple of questions. When you look at the March quarter, just wondering how the -- how you're thinking about the seasonality? And then just big picture on 2025 on WFE, with some of the puts and takes between the China restrictions and the CHIPS Act, especially with the new administration, how are you thinking?

Question: Vijay Rakesh - Mizuho Securities USA - Analyst : Got it. And then on the debt side, what are you -- (inaudible) planning in terms of paydown through '25, I guess, in terms of leveraging the balance sheet? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 1:30PM, MKSI.OQ - Q3 2024 MKS Instruments Inc Earnings Call

Question: Sreekrishnan Sankarnarayanan - TD Cowen - Analyst : I have two of them. John, one of the things you mentioned was you saw strength in semi business in DRAM, logic and foundry, not in NAND. I'm trying to figure out when do you expect to see NAND strength because some of your other component peers like Ichor said that they're beginning to see NAND strength for their business. I'm kind of curious, is there a lag effect? Have you begun to see anything? Or is it more of a 2025 event?

Question: Sreekrishnan Sankarnarayanan - TD Cowen - Analyst : Got it. That's very helpful. And a quick follow-up, John. If I remember right, you said that the E&P strength was in flex PCB drilling? I hope I heard it right. Because the question was mainly -- I thought Flex PCB is mainly used for smartphone end markets, but it seems like that end market hasn't quite recovered. So I'm trying to figure out what drove that strength for you in the quarter on the E&P side? And then I just want to like to also say that welcome to the team, Ram. I hope to interact with you more in the future.

Question: Joseph Quatrochi - Wells Fargo Securities - Analyst : I know you guys announced kind of a new semiconductor factory you're building in Malaysia. I was wondering if you could talk about, one, maybe the CapEx kind of requirements there over the next two quarters as we think about excess free cash flow for debt paydown? And then also, how do we think about the mix in production? I think a lot of your semi-related production capacity is located in China.

Question: Joseph Quatrochi - Wells Fargo Securities - Analyst : That's helpful. And then I guess, I know you guys obviously guided December, but how do we think about -- is there anything to call out in terms of seasonality into the March quarter?

Question: Melissa Weathers - Deutsche Bank AG - Analyst : Look forward to working with you, Ram. I think I heard in your preamble that you talked about a back-end win for HBM. Can you give us any more color on what that is, how big it can be? And if you expect any other similar wins?

Question: Melissa Weathers - Deutsche Bank AG - Analyst : Got it. And then on the like advanced logic side, you guys said you saw strength in the quarter there. It's pretty clear that the main player there is seeing strength. But the two kind of second-tier foundries are struggling. So any way that we should think about if that market recedes to just one major player, how would that impact MKS? And how are you derisking for that dynamic?

Question: Steve Barger - KeyBanc Capital Markets Inc. - Analyst : John, when you think about the initiatives around photonics or litho or some of the other growth areas you're targeting, can you talk about how this affects the market opportunity for you, whether it's growth rates or how this affects the TAM longer term?