MKS Instruments Inc Q4 2024 Earnings Call Summary

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

Question: Krish Sankar - TD Cowen - Analyst : Yeah, hi, thanks for taking my question. I had a couple of them. First one, Johnny mentioned how, some of your NAND component inventory at your semi cap customers is being burned. I'm kind of curious, where do you think those levels are today versus before and how much ahead would they start purchasing your components again, when they anticipate a land upturn.

Question: Krish Sankar - TD Cowen - Analyst : So is it fair to assume just given what your customers are seeing what you're seeing, sending revenue should remain around these levels into even the June quarter.

Question: Krish Sankar - TD Cowen - Analyst : And then just a quick follow up for Ram, you kind of mentioned $250 million to $260 million in OpEx is that the run rate to use for the rest of the year? What I mean, -- and should it normalize because it seems like it's stepping up quite a bit from last year.

Question: Krish Sankar - TD Cowen - Analyst : Got it. Thanks, John. Thanks, Ram. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 13, 2025 / 1:30PM, MKSI.OQ - Q4 2024 MKS Instruments Inc Earnings Call

Question: Peter Peng - J.P. Morgan Securities LLC - Analyst : Hey guys, thanks for taking my question. Just on your semiconductor segment, some of your customers and peers are talking about a mid-single digit growth for WFE. So I guess that back up just given some of the end market dynamics and some of your design wins. How are you thinking about your relative performance versus that level for the year?

Question: Peter Peng - J.P. Morgan Securities LLC - Analyst : Got it. Okay. And then on your specialty industrial, that business looks like it's kind of been steady declining over the last few quarters. Any idea of when you think that business would kind of bottom and start to recover?

Question: Peter Peng - J.P. Morgan Securities LLC - Analyst : Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 13, 2025 / 1:30PM, MKSI.OQ - Q4 2024 MKS Instruments Inc Earnings Call

Question: Melissa Weathers - Deutsche Bank Securities Inc. - Analyst : Hi there, thank you for letting me ask a question. I wanted to go back to the NAND side. Can you talk about when we're seeing the spending happen in upgrades versus greenfield capacity, where does MKS fit in that narrative? Do you have higher content in Greenfield versus upgrades, or how do we think about the upgrade dynamics this year?

Question: Melissa Weathers - Deutsche Bank Securities Inc. - Analyst : Got it. Thank you. And then still on the semi side, but on the logic piece this year we're expecting some pretty healthy spending on the leading edge nodes, gate all around volumes are going to ramp throughout the year. So can you talk about what the impact of that trend is on MKS's business? Is there, do you have any kind of content story with gate all around nodes or how should we think about that logic piece continuing to ramp through this year?

Question: Melissa Weathers - Deutsche Bank Securities Inc. - Analyst : Thank you.

Question: Jim Ricchiuti - Needham & Company Inc. - Analyst : Hi, good morning. Hey, John, besides that, which other areas, markets or subsectors are you seeing some signs of recovery green shoots as you pointed out?

Question: Jim Ricchiuti - Needham & Company Inc. - Analyst : Got it. Hey, John, looking at that that EMP business. Can you help us, maybe remind us again how much of that you would characterize as advanced packaging and whether you want to give it to us for the quarter and just some sense as to how that might have grown and or the year.

Question: Jim Ricchiuti - Needham & Company Inc. - Analyst : Got it. Thank you.

Question: Michael Mani - Bank of America - Analyst : Hi, this is Michael Mani on for Vivek Arya. Thanks so much for taking our questions. To start maybe on gross margins, it seems like they're dipping into this quarter, but that's related to higher equipment mix, but what are the puts and takes for gross margins as we go through the year? Should we expect the greater contribution from chemistry to help any other segment dynamics there? Appreciate any color. Thank you.

Question: Michael Mani - Bank of America - Analyst : Great. Thank you. And then for my follow-up I just wanted to ask about the your design when pipeline. So with out of tech electro scientific and all. How does your design when pipeline look based off the synergies you were able to generate from a customer revenue basis from these acquisitions? Has it grown, and when do you expect most of these revenues to kind of convert is that. Something we could see later this year is that more further out in 2026, '27. And then finally on that, were there any other, were there any areas within that pipeline where maybe the company was surprised at how competitive it was like areas that maybe it didn't expect to land the win but it was more competitive than they initially anticipated. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 13, 2025 / 1:30PM, MKSI.OQ - Q4 2024 MKS Instruments Inc Earnings Call

Question: Michael Mani - Bank of America - Analyst : Great. Thank you.

Question: Steve Barger - KeyBanc Capital Markets - Analyst : Thanks. John, for your comment about a healthy pace of design wins for optical assemblies, are those coming from a product refresh or are those new programs that you haven't been on before?

Question: Steve Barger - KeyBanc Capital Markets - Analyst : Are you seeing the pace of RFQs or the conversion rate from, that initial process to wins, changes the cycle starts to move forward or how would you characterize that process?

Question: Steve Barger - KeyBanc Capital Markets - Analyst : Got it. And then as you look at the progression of advanced packaging demand, is there a meaningful difference across different variations like [co-ops S versus co-ops cell]? I guess is there an optical demand trend beyond just broader packaging proliferation?

Question: Steve Barger - KeyBanc Capital Markets - Analyst : Understood, thanks.

Question: Toshiya Hari - Goldman Sachs & Company, Inc. - Analyst : Hi, good morning. Thank you so much for taking the question. John, a couple of your customers have spoken to the recent export restrictions and how that's having an impact on revenue and calendar '25. I know most of this should be indirect for you guys, but I'm curious if there's a way to quantify any negative hit from the recent restrictions in some --

Question: Toshiya Hari - Goldman Sachs & Company, Inc. - Analyst : At the end of the year, the BIS restrictions.

Question: Toshiya Hari - Goldman Sachs & Company, Inc. - Analyst : Got it. That that's helpful. And then as my follow-up maybe one for Ram, so you've been with the company for, a couple of months now. I'm curious, I know you guys are very focused on, paying down debt on the balance sheet. But curious if you've been able to identify any opportunities to sort of improve, the operations of the company, how you guys think about working capital, tax strategy, anything that you've been able to kind of, identify and potentially improve going forward if you can share that with us, that would be really helpful. Thank you.

Question: Toshiya Hari - Goldman Sachs & Company, Inc. - Analyst : Thank you very much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 13, 2025 / 1:30PM, MKSI.OQ - Q4 2024 MKS Instruments Inc Earnings Call

Question: Shane Brett - Morgan Stanley - Analyst : Thank you for taking my question. So your balance sheet inventory was down 20 days quarter to quarter. Is there anything worth noting here? And how should we think about your targets on days of inventory going forward? The reason why I'm asking this is that with what seems like within lead time orders increasing in your semi, I'm just trying to understand how much longer can you support semi continue to come higher than your expectations. Thank you.

Question: Shane Brett - Morgan Stanley - Analyst : Yeah. Thank you very much.

Question: Vijay Rakesh - Mizuho Securities - Analyst : Yeah, hey, John, and Ram. I'm just on the AI side, you mentioned, the sales and in packaging. Can you, talk to like what person is that AI makes as a person of a total revenues and how do you see that, I would say growing in 2025? I know you mentioned that, as a person of the substrate market it's pretty small, but if you walk through like just told you what the exposure is. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 13, 2025 / 1:30PM, MKSI.OQ - Q4 2024 MKS Instruments Inc Earnings Call

Question: Vijay Rakesh - Mizuho Securities - Analyst : Got it. And then, Ram, as you look at in a better free cash flow and driving faster better prepayments, any thoughts on the deleveraging from the ForEx down to the 2 times, your longer term target? Are you -- any time and on then are you pulling it in, or you look at that. Thanks.

Question: Vijay Rakesh - Mizuho Securities - Analyst : Thanks.

Question: Joe Quatrochi - Wells Fargo Securities - Analyst : Yeah. Thanks for taking the questions. But I think in the past, like during the December quarter call you talked about like the growth that are in your optics business within the semi's business. I was curious how that did in 2024 and how do you think about the opportunity for growth in 2025 given the outlook for some of those customers. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 13, 2025 / 1:30PM, MKSI.OQ - Q4 2024 MKS Instruments Inc Earnings Call

Question: Joe Quatrochi - Wells Fargo Securities - Analyst : Thanks. And this is a follow-up maybe a little bit more housekeeping, but I think you're guiding interest expense to be a slightly quarter to quarter. I know it's a net number, but I would have thought, I guess that would be down given the repricing and pre-payment in January.

Question: Joe Quatrochi - Wells Fargo Securities - Analyst : Okay, thank you.