MKS Instruments, Inc. (NASDAQ: MKSI), a global provider of enabling
technologies that transform our world, today reported fourth
quarter and full year 2023 financial results.
“We closed the year on a solid note with revenue and Adjusted
EBITDA exceeding the high-end of our guidance range,” said John
T.C. Lee, President and Chief Executive Officer.
Mr. Lee added, “We believe our broad portfolio of proprietary
and foundational solutions puts us in pole position to capture a
wide array of opportunities when end market conditions improve,
setting the stage for attractive shareholder value creation in the
years to come.”
“In 2023, we executed on all the levers under our control,
including factory efficiency, operating expense management,
lowering our tax rate, and proactive management of our debt,
including successfully completing a repricing and allocating more
than 80% of our free cash flow for debt paydown,” said Seth H.
Bagshaw, Executive Vice President and Chief Financial Officer. “In
addition, in the last month, we successfully completed a
refinancing of our term loan A and made a voluntary debt prepayment
of $50 million.”
First Quarter 2024 Outlook
For the first quarter of 2024, the Company expects revenue of
$840 million, plus or minus $40 million, Adjusted EBITDA of $182
million, plus or minus $22 million, and Non-GAAP net earnings per
diluted share of $0.72, plus or minus $0.25.
Conference Call Details
A conference call with management will be held on Thursday,
February 8, 2024 at 8:30 a.m. (Eastern Time). To participate in the
call by phone, participants should visit the Investor Relations
section of MKS’ website at investor.mks.com and click on Events
& Presentations, where you will be able to register online and
receive dial-in details. We encourage participants to register and
dial in to the conference call at least 15 minutes before the start
of the call to ensure a timely connection. A live and archived
webcast and related presentation materials will be available on the
Investor Relations section of the MKS website.
About MKS Instruments
MKS Instruments enables technologies that transform our world.
We deliver foundational technology solutions to leading edge
semiconductor manufacturing, electronics and packaging, and
specialty industrial applications. We apply our broad science and
engineering capabilities to create instruments, subsystems,
systems, process control solutions and specialty chemicals
technology that improve process performance, optimize productivity
and enable unique innovations for many of the world's leading
technology and industrial companies. Our solutions are critical to
addressing the challenges of miniaturization and complexity in
advanced device manufacturing by enabling increased power, speed,
feature enhancement, and optimized connectivity. Our solutions are
also critical to addressing ever-increasing performance
requirements across a wide array of specialty industrial
applications. Additional information can be found at
www.mks.com.
Use of Non-GAAP Financial Results
This press release includes financial measures that are not in
accordance with U.S. generally accepted accounting principles
(“Non-GAAP financial measures”). These Non-GAAP financial measures
should be viewed in addition to, and not as a substitute for, MKS’
reported results under U.S. generally accepted accounting
principles (“GAAP”), and may be different from Non-GAAP financial
measures used by other companies. In addition, these Non-GAAP
financial measures are not based on any comprehensive set of
accounting rules or principles. MKS management believes the
presentation of these Non-GAAP financial measures is useful to
investors for comparing prior periods and analyzing ongoing
business trends and operating results.
MKS is not providing a quantitative reconciliation of
forward-looking Non-GAAP net earnings per diluted share and
Adjusted EBITDA to their most directly comparable GAAP financial
measures because it is unable to estimate with reasonable certainty
the ultimate timing or amount of certain significant items without
unreasonable efforts. These items include, but are not limited to,
acquisition and integration costs, amortization of intangible
assets, ransomware remediation costs, restructuring expense,
goodwill and intangible asset impairments, excess and obsolescence
inventory charges, amortization of debt issuance costs, debt
refinancing fee, loss on extinguishment of debt, and the income tax
effect of these items. These items are uncertain, depend on various
factors, including, but not limited to, our acquisition of Atotech
Limited (“Atotech”) in August 2022 (the “Atotech Acquisition”), the
timing of ransomware remediation, and the interest rate and
refinancing environment, and could have a material impact on GAAP
reported results for the relevant period.
For further information regarding these Non-GAAP financial
measures, including a change to how MKS defines Adjusted EBITDA,
please refer to the tables presenting reconciliations of our
Non-GAAP results to our GAAP results and the “Notes on Our Non-GAAP
Financial Information” at the end of this press release.
|
Selected GAAP and Non-GAAP Financial
Measures(In millions, except per share
data) |
|
|
|
|
|
Quarter |
|
Full Year |
|
Q4 2023 |
|
Q3 2023 |
|
Q4 2022 |
|
2023 |
|
2022 |
Net
revenues |
|
|
|
|
|
|
|
|
|
Semiconductor |
$ |
362 |
|
|
$ |
367 |
|
|
$ |
503 |
|
|
$ |
1,479 |
|
|
$ |
2,041 |
|
Electronics & Packaging |
|
226 |
|
|
|
243 |
|
|
|
266 |
|
|
$ |
916 |
|
|
$ |
541 |
|
Specialty Industrial |
|
305 |
|
|
|
322 |
|
|
|
316 |
|
|
$ |
1,227 |
|
|
$ |
964 |
|
Total net revenues |
$ |
893 |
|
|
$ |
932 |
|
|
$ |
1,085 |
|
|
$ |
3,622 |
|
|
$ |
3,547 |
|
GAAP Financial Measures |
|
|
|
|
|
|
|
|
|
Gross margin |
|
46.0 |
% |
|
|
45.7 |
% |
|
|
44.7 |
% |
|
|
45.3 |
% |
|
|
43.6 |
% |
Operating margin |
|
2.7 |
% |
|
|
12.6 |
% |
|
|
15.0 |
% |
|
|
(42.9 |
%) |
|
|
17.4 |
% |
Net (loss) income |
$ |
(68 |
) |
|
$ |
39 |
|
|
$ |
54 |
|
|
$ |
(1,841 |
) |
|
$ |
333 |
|
Diluted (loss) income per
share |
$ |
(1.02 |
) |
|
$ |
0.58 |
|
|
|
0.81 |
|
|
$ |
(27.54 |
) |
|
$ |
5.56 |
|
Non-GAAP Financial
Measures |
|
|
|
|
|
|
|
|
|
Gross margin |
|
46.0 |
% |
|
|
47.1 |
% |
|
|
45.9 |
% |
|
|
45.7 |
% |
|
|
45.1 |
% |
Operating margin |
|
20.3 |
% |
|
|
21.8 |
% |
|
|
23.6 |
% |
|
|
19.5 |
% |
|
|
24.5 |
% |
Net earnings |
$ |
78 |
|
|
$ |
98 |
|
|
$ |
133 |
|
|
$ |
297 |
|
|
$ |
597 |
|
Diluted earnings per share |
$ |
1.17 |
|
|
$ |
1.46 |
|
|
$ |
2.00 |
|
|
$ |
4.43 |
|
|
$ |
9.97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional Financial Information
At December 31, 2023, the Company had $875 million in cash
and short-term investments, $5.0 billion of secured term loan
principal outstanding, and up to $500 million of additional
borrowing capacity under a revolving credit facility, subject to
certain leverage ratio requirements. During the fourth quarter of
2023, the Company paid a cash dividend of $15 million or $0.22 per
diluted share and made a voluntary prepayment of $100 million on
its term loan A.
In January 2024, the Company successfully completed the
refinancing of its term loan A using a portion of the proceeds of
its $490 million incremental USD term loan B and €250 million
incremental EUR term loan B. In February 2024, the Company made a
voluntary prepayment of $50 million on its USD term loan B.
SAFE HARBOR FOR FORWARD-LOOKING
STATEMENTS
This press release contains “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of
1995, Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934 regarding the future financial
performance, business prospects and growth of MKS Instruments, Inc.
(“MKS”, the “Company”, “our”, or “we”). These statements are only
predictions based on current assumptions and expectations. Any
statements that are not statements of historical fact (including
statements containing the words “will,” “projects,” “intends,”
“believes,” “plans,” “anticipates,” “expects,” “estimates,”
“forecasts,” “continues” and similar expressions) should be
considered to be forward-looking statements. 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 that we make are the need to generate
sufficient cash flows to service and repay the substantial
indebtedness we incurred in connection with the Atotech
Acquisition; the terms of our existing credit facilities under
which we incurred such debt; our entry into the chemicals
technology business through the Atotech Acquisition, in which we
did not have previous experience and which may expose us to
significant additional liabilities; the risk that we are unable to
integrate the Atotech Acquisition successfully or realize the
anticipated synergies, cost savings and other benefits of the
Atotech Acquisition; legal, reputational, financial and contractual
risks resulting from the ransomware incident we identified in
February 2023, and other risks related to cybersecurity, data
privacy and intellectual property; competition from larger, more
advanced or more established companies in our markets; the ability
to successfully grow our business and the businesses of Atotech and
Electro Scientific Industries, Inc., which we acquired in February
2019, and financial risks associated with those and potential
future acquisitions, including goodwill and intangible asset
impairments; manufacturing and sourcing risks, including those
associated with limited and sole source suppliers and the impact
and duration of supply chain disruptions, component shortages, and
price increases; changes in global demand and the impact of
COVID-19 or any other widespread health crises, including with
respect to such supply chain disruptions, component shortages and
price increases; risks associated with doing business
internationally, including geopolitical conflicts, such as the
Israel-Hamas war, trade compliance, regulatory restrictions on our
products, components or markets, particularly the semiconductor
market, and unfavorable currency exchange and tax rate
fluctuations, which risks become more significant as we grow our
business internationally and in China specifically; conditions
affecting the markets in which we operate, including fluctuations
in capital spending in the semiconductor, electronics manufacturing
and automotive industries, and fluctuations in sales to our major
customers; disruptions or delays from third-party service providers
upon which our operations may rely; the ability to anticipate and
meet customer demand; the challenges, risks and costs involved with
integrating or transitioning global operations of the companies we
have acquired; risks associated with the attraction and retention
of key personnel; potential fluctuations in quarterly results;
dependence on new product development; rapid technological and
market change; acquisition strategy; volatility of stock price;
risks associated with chemical manufacturing and environmental
regulation compliance; risks related to defective products;
financial and legal risk management; and the other important
factors described in MKS’ Annual Report on Form 10-K for the year
ended December 31, 2022 and any subsequent Quarterly Reports on
Form 10-Q, as filed with the U.S. Securities and Exchange
Commission. 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. Amounts reported
in this press release are preliminary and subject to finalization
prior to the filing of our Annual Report on Form 10-K for the year
ended December 31, 2023.
Company Contact: David RyzhikVice President,
Investor RelationsTelephone: (978) 557-5180Email:
david.ryzhik@mksinst.com
|
MKS
Instruments, Inc. |
Unaudited
Consolidated Statements of Operations |
(In
millions, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
|
2023 |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Net
revenues: |
|
|
|
|
|
|
|
|
|
Products |
$ |
785 |
|
|
$ |
818 |
|
|
$ |
965 |
|
|
$ |
3,200 |
|
|
$ |
3,119 |
|
Services |
|
108 |
|
|
|
114 |
|
|
|
120 |
|
|
|
422 |
|
|
|
428 |
|
Total net revenues |
|
893 |
|
|
|
932 |
|
|
|
1,085 |
|
|
|
3,622 |
|
|
|
3,547 |
|
Cost of
revenues: |
|
|
|
|
|
|
|
|
|
Products |
|
423 |
|
|
|
446 |
|
|
|
531 |
|
|
|
1,748 |
|
|
|
1,774 |
|
Services |
|
59 |
|
|
|
60 |
|
|
|
69 |
|
|
|
232 |
|
|
|
226 |
|
Total cost of revenues |
|
482 |
|
|
|
506 |
|
|
|
600 |
|
|
|
1,980 |
|
|
|
2,000 |
|
Gross
profit |
|
411 |
|
|
|
426 |
|
|
|
485 |
|
|
|
1,642 |
|
|
|
1,547 |
|
Research and
development |
|
70 |
|
|
|
71 |
|
|
|
73 |
|
|
|
288 |
|
|
|
241 |
|
Selling,
general and administrative |
|
160 |
|
|
|
167 |
|
|
|
168 |
|
|
|
675 |
|
|
|
488 |
|
Acquisition
and integration costs |
|
3 |
|
|
|
3 |
|
|
|
11 |
|
|
|
16 |
|
|
|
52 |
|
Restructuring |
|
7 |
|
|
|
1 |
|
|
|
1 |
|
|
|
20 |
|
|
|
10 |
|
Fees and
expenses related to the repricing of Term Loan Facility |
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
— |
|
Amortization
of intangible assets |
|
70 |
|
|
|
68 |
|
|
|
69 |
|
|
|
295 |
|
|
|
146 |
|
Goodwill and
intangible asset impairment |
|
75 |
|
|
|
— |
|
|
|
— |
|
|
|
1,902 |
|
|
|
— |
|
Gain on sale
of long-lived assets |
|
— |
|
|
|
(2 |
) |
|
|
— |
|
|
|
(2 |
) |
|
|
(7 |
) |
Income
(loss) from operations |
|
24 |
|
|
|
118 |
|
|
|
163 |
|
|
|
(1,554 |
) |
|
|
617 |
|
Interest
income |
|
(7 |
) |
|
|
(4 |
) |
|
|
(2 |
) |
|
|
(17 |
) |
|
|
(4 |
) |
Interest
expense |
|
90 |
|
|
|
93 |
|
|
|
85 |
|
|
|
356 |
|
|
|
177 |
|
Loss on
extinguishment of debt |
|
8 |
|
|
|
— |
|
|
|
— |
|
|
|
8 |
|
|
|
— |
|
Other
expense, net |
|
12 |
|
|
|
7 |
|
|
|
15 |
|
|
|
27 |
|
|
|
11 |
|
(Loss)
income before income taxes |
|
(79 |
) |
|
|
22 |
|
|
|
65 |
|
|
|
(1,928 |
) |
|
|
433 |
|
(Benefit)
provision for income taxes |
|
(11 |
) |
|
|
(17 |
) |
|
|
11 |
|
|
|
(87 |
) |
|
|
100 |
|
Net (loss)
income |
$ |
(68 |
) |
|
$ |
39 |
|
|
$ |
54 |
|
|
$ |
(1,841 |
) |
|
$ |
333 |
|
Net (loss)
income per share: |
|
|
|
|
|
|
|
|
|
Basic |
$ |
(1.02 |
) |
|
$ |
0.59 |
|
|
$ |
0.81 |
|
|
$ |
(27.54 |
) |
|
$ |
5.57 |
|
Diluted |
$ |
(1.02 |
) |
|
$ |
0.58 |
|
|
$ |
0.81 |
|
|
$ |
(27.54 |
) |
|
$ |
5.56 |
|
Cash
dividends per common share |
$ |
0.22 |
|
|
$ |
0.22 |
|
|
$ |
0.22 |
|
|
$ |
0.88 |
|
|
$ |
0.88 |
|
Weighted
average shares outstanding: |
|
|
|
|
|
|
|
|
|
Basic |
|
66.9 |
|
|
|
66.9 |
|
|
|
66.6 |
|
|
|
66.8 |
|
|
|
59.7 |
|
Diluted |
|
66.9 |
|
|
|
67.1 |
|
|
|
66.7 |
|
|
|
66.8 |
|
|
|
59.9 |
|
|
|
|
|
|
|
|
|
|
|
|
MKS
Instruments, Inc. |
Unaudited
Consolidated Balance Sheets |
(In
millions) |
|
|
|
|
|
|
|
|
|
December 31, |
|
December 31, |
|
2023 |
|
2022 |
ASSETS |
|
|
|
Cash and cash equivalents |
$ |
875 |
|
|
$ |
909 |
|
Short-term
investments |
|
— |
|
|
|
1 |
|
Trade
accounts receivable, net |
|
603 |
|
|
|
720 |
|
Inventories |
|
991 |
|
|
|
977 |
|
Other
current assets |
|
304 |
|
|
|
187 |
|
Total current assets |
|
2,773 |
|
|
|
2,794 |
|
Property,
plant and equipment, net |
|
784 |
|
|
|
800 |
|
Right-of-use
assets |
|
225 |
|
|
|
234 |
|
Goodwill |
|
2,554 |
|
|
|
4,308 |
|
Intangible
assets, net |
|
2,619 |
|
|
|
3,173 |
|
Other
assets |
|
241 |
|
|
|
186 |
|
Total assets |
$ |
9,196 |
|
|
$ |
11,495 |
|
LIABILITIES
AND STOCKHOLDERS' EQUITY |
|
|
|
Short-term
debt |
$ |
93 |
|
|
$ |
93 |
|
Accounts
payable |
|
327 |
|
|
|
426 |
|
Other
current liabilities |
|
506 |
|
|
|
433 |
|
Total current liabilities |
|
926 |
|
|
|
952 |
|
Long-term
debt, net |
|
4,696 |
|
|
|
4,834 |
|
Non-current
deferred taxes |
|
640 |
|
|
|
783 |
|
Non-current
accrued compensation |
|
151 |
|
|
|
138 |
|
Non-current
lease liability |
|
205 |
|
|
|
215 |
|
Other
non-current liabilities |
|
106 |
|
|
|
90 |
|
Total liabilities |
|
6,724 |
|
|
|
7,012 |
|
Stockholders' equity: |
|
|
|
Common
stock |
|
— |
|
|
|
— |
|
Additional
paid-in capital |
|
2,195 |
|
|
|
2,142 |
|
Retained
earnings |
|
373 |
|
|
|
2,272 |
|
Accumulated
other comprehensive (loss) income |
|
(96 |
) |
|
|
69 |
|
Total stockholders' equity |
|
2,472 |
|
|
|
4,483 |
|
Total
liabilities and stockholders' equity |
$ |
9,196 |
|
|
$ |
11,495 |
|
|
|
|
|
|
MKS
Instruments, Inc. |
Unaudited
Consolidated Statements of Cash Flows |
(In
millions) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
|
2023 |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Cash flows
from operating activities: |
|
|
|
|
|
|
|
|
|
Net (loss) income |
$ |
(68 |
) |
|
$ |
39 |
|
|
$ |
54 |
|
|
$ |
(1,841 |
) |
|
$ |
333 |
|
Adjustments
to reconcile net (loss) income to net cash provided by operating
activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
95 |
|
|
|
93 |
|
|
|
96 |
|
|
|
397 |
|
|
|
216 |
|
Amortization of inventory step-up to fair value |
|
— |
|
|
|
— |
|
|
|
13 |
|
|
|
— |
|
|
|
52 |
|
Goodwill and intangible asset impairments |
|
75 |
|
|
|
— |
|
|
|
— |
|
|
|
1,902 |
|
|
|
— |
|
Unrealized loss on derivatives not designated as hedging
instruments |
|
10 |
|
|
|
3 |
|
|
|
7 |
|
|
|
32 |
|
|
|
13 |
|
Amortization of debt issuance costs and original issue
discount |
|
10 |
|
|
|
8 |
|
|
|
10 |
|
|
|
33 |
|
|
|
56 |
|
Loss on extinguishment of debt |
|
8 |
|
|
|
— |
|
|
|
— |
|
|
|
8 |
|
|
|
— |
|
Gain on sale of long-lived assets |
|
— |
|
|
|
(2 |
) |
|
|
— |
|
|
|
(2 |
) |
|
|
(7 |
) |
Stock-based compensation |
|
11 |
|
|
|
13 |
|
|
|
13 |
|
|
|
54 |
|
|
|
45 |
|
Provision for excess and obsolete inventory |
|
10 |
|
|
|
24 |
|
|
|
11 |
|
|
|
64 |
|
|
|
21 |
|
Deferred income taxes |
|
(61 |
) |
|
|
(53 |
) |
|
|
(50 |
) |
|
|
(234 |
) |
|
|
(46 |
) |
Other |
|
— |
|
|
|
3 |
|
|
|
— |
|
|
|
5 |
|
|
|
3 |
|
Changes in operating assets and liabilities, net of acquired assets
and liabilities |
|
90 |
|
|
|
32 |
|
|
|
30 |
|
|
|
(99 |
) |
|
|
(157 |
) |
Net cash
provided by operating activities |
|
180 |
|
|
|
160 |
|
|
|
184 |
|
|
|
319 |
|
|
|
529 |
|
Cash flows
from investing activities: |
|
|
|
|
|
|
|
|
|
Acquisition of business, net of cash acquired |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4,473 |
) |
Purchases of investments |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
Maturities of investments |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
77 |
|
Proceeds from sale of long-lived assets |
|
— |
|
|
|
2 |
|
|
|
1 |
|
|
|
3 |
|
|
|
9 |
|
Purchases of property, plant and equipment |
|
(34 |
) |
|
|
(18 |
) |
|
|
(54 |
) |
|
|
(87 |
) |
|
|
(164 |
) |
Net cash
used in investing activities |
|
(34 |
) |
|
|
(16 |
) |
|
|
(53 |
) |
|
|
(84 |
) |
|
|
(4,552 |
) |
Cash flows
from financing activities: |
|
|
|
|
|
|
|
|
|
Proceeds from borrowings |
|
214 |
|
|
|
— |
|
|
|
3 |
|
|
|
216 |
|
|
|
5,237 |
|
Payments of borrowings |
|
(336 |
) |
|
|
(22 |
) |
|
|
(127 |
) |
|
|
(403 |
) |
|
|
(962 |
) |
Payments of deferred financing fees |
|
(9 |
) |
|
|
— |
|
|
|
— |
|
|
|
(9 |
) |
|
|
(249 |
) |
Dividend payments |
|
(15 |
) |
|
|
(15 |
) |
|
|
(15 |
) |
|
|
(59 |
) |
|
|
(52 |
) |
Net proceeds (payments) related to employee stock awards |
|
4 |
|
|
|
(1 |
) |
|
|
4 |
|
|
|
(1 |
) |
|
|
(1 |
) |
Other financing activities |
|
(1 |
) |
|
|
(1 |
) |
|
|
(2 |
) |
|
|
(3 |
) |
|
|
(2 |
) |
Net cash
(used in) provided by financing activities |
|
(143 |
) |
|
|
(39 |
) |
|
|
(137 |
) |
|
|
(259 |
) |
|
|
3,971 |
|
Effect of
exchange rate changes on cash and cash equivalents |
|
13 |
|
|
|
(3 |
) |
|
|
31 |
|
|
|
(10 |
) |
|
|
(5 |
) |
Increase
(decrease) in cash and cash equivalents |
|
16 |
|
|
|
102 |
|
|
|
25 |
|
|
|
(34 |
) |
|
|
(57 |
) |
Cash and
cash equivalents at beginning of period |
|
859 |
|
|
|
757 |
|
|
|
884 |
|
|
|
909 |
|
|
|
966 |
|
Cash and
cash equivalents at end of period |
$ |
875 |
|
|
$ |
859 |
|
|
|
909 |
|
|
$ |
875 |
|
|
$ |
909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following
supplemental Non-GAAP earnings information is presented to aid in
understanding MKS’ operating results: |
|
|
|
|
|
|
|
|
|
|
MKS
Instruments, Inc. |
Schedule
Reconciling Selected Non-GAAP Financial Measures |
(In
millions, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
|
2023 |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Net (loss) income |
$ |
(68 |
) |
|
$ |
39 |
|
|
$ |
54 |
|
|
$ |
(1,841 |
) |
|
$ |
333 |
|
Excess and obsolete charge from discontinued product line (Note
1) |
|
— |
|
|
|
13 |
|
|
|
— |
|
|
|
13 |
|
|
|
— |
|
Acquisition inventory step-up (Note 2) |
|
— |
|
|
|
— |
|
|
|
13 |
|
|
|
— |
|
|
|
52 |
|
Acquisition and integration costs (Note 3) |
|
3 |
|
|
|
3 |
|
|
|
11 |
|
|
|
16 |
|
|
|
52 |
|
Restructuring (Note 4) |
|
7 |
|
|
|
1 |
|
|
|
1 |
|
|
|
20 |
|
|
|
10 |
|
Amortization of intangible assets |
|
70 |
|
|
|
68 |
|
|
|
69 |
|
|
|
295 |
|
|
|
146 |
|
Goodwill and intangible asset impairment (Note 5) |
|
75 |
|
|
|
— |
|
|
|
— |
|
|
|
1,902 |
|
|
|
— |
|
Gain on sale of long-lived assets (Note 6) |
|
— |
|
|
|
(2 |
) |
|
|
— |
|
|
|
(2 |
) |
|
|
(7 |
) |
Amortization of debt issuance costs (Note 7) |
|
7 |
|
|
|
6 |
|
|
|
7 |
|
|
|
24 |
|
|
|
51 |
|
Fees and expenses related to repricing of Term Loan Facility (Note
8) |
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
— |
|
Ransomware incident (Note 9) |
|
1 |
|
|
|
2 |
|
|
|
— |
|
|
|
15 |
|
|
|
— |
|
Loss on debt extinguishment (Note 10) |
|
8 |
|
|
|
— |
|
|
|
— |
|
|
|
8 |
|
|
|
— |
|
Currency hedge gain (Note 11) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5 |
) |
Reversal of indefinite reinvestment assertion (Note 12) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
30 |
|
Tax effect of Non-GAAP adjustments (Note 13) |
|
(26 |
) |
|
|
(32 |
) |
|
|
(22 |
) |
|
|
(156 |
) |
|
|
(65 |
) |
Non-GAAP net
earnings |
$ |
78 |
|
|
$ |
98 |
|
|
$ |
133 |
|
|
$ |
297 |
|
|
$ |
597 |
|
Non-GAAP net
earnings per diluted share |
$ |
1.17 |
|
|
$ |
1.46 |
|
|
$ |
2.00 |
|
|
$ |
4.43 |
|
|
$ |
9.97 |
|
Weighted
average diluted shares outstanding |
|
67.1 |
|
|
|
67.1 |
|
|
|
66.7 |
|
|
|
67.0 |
|
|
|
59.9 |
|
|
|
|
|
|
|
|
|
|
|
Net cash
provided by operating activities |
$ |
180 |
|
|
$ |
160 |
|
|
$ |
184 |
|
|
$ |
319 |
|
|
$ |
529 |
|
Purchases of
property, plant and equipment |
|
(34 |
) |
|
|
(18 |
) |
|
|
(54 |
) |
|
|
(87 |
) |
|
|
(164 |
) |
Free cash
flow |
$ |
146 |
|
|
$ |
142 |
|
|
$ |
130 |
|
|
$ |
232 |
|
|
$ |
365 |
|
|
|
|
|
|
|
|
|
|
|
|
MKS
Instruments, Inc. |
Schedule
Reconciling Selected Non-GAAP Financial Measures |
(In
millions) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
|
2023 |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Gross profit |
$ |
411 |
|
|
$ |
426 |
|
|
$ |
485 |
|
|
$ |
1,642 |
|
|
$ |
1,547 |
|
Gross
margin |
|
46.0 |
% |
|
|
45.7 |
% |
|
|
44.7 |
% |
|
|
45.3 |
% |
|
|
43.6 |
% |
Excess and obsolete charge from discontinued product line (Note
1) |
|
— |
|
|
|
13 |
|
|
|
— |
|
|
|
13 |
|
|
|
— |
|
Acquisition inventory step-up (Note 2) |
|
— |
|
|
|
— |
|
|
|
13 |
|
|
|
— |
|
|
|
52 |
|
Non-GAAP
gross profit |
$ |
411 |
|
|
$ |
439 |
|
|
$ |
498 |
|
|
$ |
1,655 |
|
|
$ |
1,599 |
|
Non-GAAP
gross margin |
|
46.0 |
% |
|
|
47.1 |
% |
|
|
45.9 |
% |
|
|
45.7 |
% |
|
|
45.1 |
% |
Operating
expenses |
$ |
387 |
|
|
$ |
308 |
|
|
$ |
322 |
|
|
$ |
3,196 |
|
|
$ |
930 |
|
Acquisition and integration costs (Note 3) |
|
3 |
|
|
|
3 |
|
|
|
11 |
|
|
|
16 |
|
|
|
52 |
|
Restructuring (Note 4) |
|
7 |
|
|
|
1 |
|
|
|
1 |
|
|
|
20 |
|
|
|
10 |
|
Amortization of intangible assets |
|
70 |
|
|
|
68 |
|
|
|
69 |
|
|
|
295 |
|
|
|
146 |
|
Goodwill and intangible asset impairment (Note 5) |
|
75 |
|
|
|
— |
|
|
|
— |
|
|
|
1,902 |
|
|
|
— |
|
Gain on sale of long-lived assets (Note 6) |
|
— |
|
|
|
(2 |
) |
|
|
— |
|
|
|
(2 |
) |
|
|
(7 |
) |
Fees and expenses related to repricing of Term Loan Facility (Note
8) |
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
— |
|
Ransomware incident (Note 9) |
|
1 |
|
|
|
2 |
|
|
|
— |
|
|
|
15 |
|
|
|
— |
|
Non-GAAP
operating expenses |
$ |
229 |
|
|
$ |
236 |
|
|
$ |
242 |
|
|
$ |
948 |
|
|
$ |
729 |
|
Income
(loss) from operations |
$ |
24 |
|
|
$ |
118 |
|
|
$ |
163 |
|
|
$ |
(1,554 |
) |
|
$ |
617 |
|
Operating
margin |
|
2.7 |
% |
|
|
12.6 |
% |
|
|
15.0 |
% |
|
|
(42.9 |
%) |
|
|
17.4 |
% |
Excess and obsolete charge from discontinued product line (Note
1) |
|
— |
|
|
|
13 |
|
|
|
— |
|
|
|
13 |
|
|
|
— |
|
Acquisition inventory step-up (Note 2) |
|
— |
|
|
|
— |
|
|
|
13 |
|
|
|
— |
|
|
|
52 |
|
Acquisition and integration costs (Note 3) |
|
3 |
|
|
|
3 |
|
|
|
11 |
|
|
|
16 |
|
|
|
52 |
|
Restructuring (Note 4) |
|
7 |
|
|
|
1 |
|
|
|
1 |
|
|
|
20 |
|
|
|
10 |
|
Amortization of intangible assets |
|
70 |
|
|
|
68 |
|
|
|
69 |
|
|
|
295 |
|
|
|
146 |
|
Goodwill and intangible asset impairment (Note 5) |
|
75 |
|
|
|
— |
|
|
|
— |
|
|
|
1,902 |
|
|
|
— |
|
Gain on sale of long-lived assets (Note 6) |
|
— |
|
|
|
(2 |
) |
|
|
— |
|
|
|
(2 |
) |
|
|
(7 |
) |
Fees and expenses related to repricing of Term Loan Facility (Note
8) |
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
— |
|
Ransomware incident (Note 9) |
|
1 |
|
|
|
2 |
|
|
|
— |
|
|
|
15 |
|
|
|
— |
|
Non-GAAP
income from operations |
$ |
182 |
|
|
$ |
203 |
|
|
$ |
257 |
|
|
$ |
707 |
|
|
$ |
870 |
|
Non-GAAP
operating margin |
|
20.3 |
% |
|
|
21.8 |
% |
|
|
23.6 |
% |
|
|
19.5 |
% |
|
|
24.5 |
% |
Interest
expense, net |
$ |
83 |
|
|
$ |
89 |
|
|
$ |
83 |
|
|
$ |
339 |
|
|
$ |
173 |
|
Amortization of debt issuance costs (Note 7) |
|
7 |
|
|
|
6 |
|
|
|
7 |
|
|
|
24 |
|
|
|
51 |
|
Non-GAAP
interest expense, net |
$ |
76 |
|
|
$ |
83 |
|
|
$ |
75 |
|
|
$ |
315 |
|
|
$ |
122 |
|
Net (loss)
income |
$ |
(68 |
) |
|
$ |
39 |
|
|
$ |
54 |
|
|
$ |
(1,841 |
) |
|
$ |
333 |
|
Interest expense, net |
|
83 |
|
|
|
89 |
|
|
|
83 |
|
|
|
339 |
|
|
|
173 |
|
Other expense, net (Note 14) |
|
12 |
|
|
|
7 |
|
|
|
15 |
|
|
|
27 |
|
|
|
11 |
|
(Benefit) provision for income taxes |
|
(11 |
) |
|
|
(17 |
) |
|
|
11 |
|
|
|
(87 |
) |
|
|
100 |
|
Depreciation |
|
25 |
|
|
|
25 |
|
|
|
27 |
|
|
|
102 |
|
|
|
70 |
|
Amortization |
|
70 |
|
|
|
68 |
|
|
|
69 |
|
|
|
295 |
|
|
|
146 |
|
Excess and obsolete charge from discontinued product line (Note
1) |
|
— |
|
|
|
13 |
|
|
|
— |
|
|
|
13 |
|
|
|
— |
|
Stock-based compensation |
|
11 |
|
|
|
13 |
|
|
|
13 |
|
|
|
54 |
|
|
|
45 |
|
Acquisition inventory step-up (Note 2) |
|
— |
|
|
|
— |
|
|
|
13 |
|
|
|
— |
|
|
|
52 |
|
Acquisition and integration costs (Note 3) |
|
3 |
|
|
|
3 |
|
|
|
11 |
|
|
|
16 |
|
|
|
52 |
|
Restructuring (Note 4) |
|
7 |
|
|
|
1 |
|
|
|
1 |
|
|
|
20 |
|
|
|
10 |
|
Goodwill and intangible asset impairment (Note 5) |
|
75 |
|
|
|
— |
|
|
|
— |
|
|
|
1,902 |
|
|
|
— |
|
Gain on sale of long-lived assets (Note 6) |
|
— |
|
|
|
(2 |
) |
|
|
— |
|
|
|
(2 |
) |
|
|
(7 |
) |
Fees and expenses related to repricing of Term Loan Facility (Note
8) |
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
— |
|
Ransomware incident (Note 9) |
|
1 |
|
|
|
2 |
|
|
|
— |
|
|
|
15 |
|
|
|
— |
|
Loss on debt extinguishment (Note 10) |
|
8 |
|
|
|
|
|
|
|
8 |
|
|
|
Currency hedge gain (Note 11) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5 |
) |
Adjusted
EBITDA (Note 14) |
$ |
218 |
|
|
$ |
241 |
|
|
$ |
297 |
|
|
$ |
863 |
|
|
$ |
980 |
|
Adjusted
EBITDA margin |
|
24.4 |
% |
|
|
25.8 |
% |
|
|
27.4 |
% |
|
|
23.8 |
% |
|
|
27.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
MKS
Instruments, Inc. |
Reconciliation of GAAP Income Tax Rate to Non-GAAP Income
Tax Rate |
(In
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, 2023 |
|
Three Months Ended December 31, 2022 |
|
(Loss) Income Before |
|
(Benefit) Provision |
|
Effective |
|
Income Before |
|
Provision |
|
Effective |
|
Income Taxes |
|
for Income Taxes |
|
Tax Rate |
|
Income Taxes |
|
for Income Taxes |
|
Tax Rate |
GAAP |
$ |
(79 |
) |
|
$ |
(11 |
) |
|
14.2 |
% |
|
$ |
65 |
|
|
$ |
11 |
|
|
17.1 |
% |
Excess and obsolete charge from discontinued product line (Note
1) |
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
Acquisition inventory step-up (Note 2) |
|
— |
|
|
|
— |
|
|
|
|
|
13 |
|
|
|
— |
|
|
|
Acquisition and integration costs (Note 3) |
|
3 |
|
|
|
— |
|
|
|
|
|
11 |
|
|
|
— |
|
|
|
Restructuring (Note 4) |
|
7 |
|
|
|
— |
|
|
|
|
|
1 |
|
|
|
— |
|
|
|
Amortization of intangible assets |
|
70 |
|
|
|
— |
|
|
|
|
|
69 |
|
|
|
— |
|
|
|
Goodwill and intangible asset impairment (Note 5) |
|
75 |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
Gain on sale of long-lived assets (Note 6) |
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
Amortization of debt issuance costs (Note 7) |
|
7 |
|
|
|
— |
|
|
|
|
|
7 |
|
|
|
— |
|
|
|
Fees and expenses related to repricing of Term Loan Facility (Note
8) |
|
2 |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
Ransomware incident (Note 9) |
|
1 |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
Loss on debt extinguishment (Note 10) |
|
8 |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
Currency hedge gain (Note 11) |
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
Tax effect of Non-GAAP adjustments (Note 13) |
|
— |
|
|
|
26 |
|
|
|
|
|
— |
|
|
|
22 |
|
|
|
Non-GAAP |
$ |
94 |
|
|
$ |
15 |
|
|
15.6 |
% |
|
$ |
166 |
|
|
$ |
33 |
|
|
19.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2023 |
|
|
|
|
|
|
|
Income Before |
|
(Benefit) Provision |
|
Effective |
|
|
|
|
|
|
|
Income Taxes |
|
for Income Taxes |
|
Tax Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP |
$ |
22 |
|
|
$ |
(17 |
) |
|
(75.3 |
%) |
|
|
|
|
|
|
Excess and obsolete charge from discontinued product line (Note
1) |
|
13 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Acquisition and integration costs (Note 3) |
|
3 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Restructuring (Note 4) |
|
1 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
68 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Gain on sale of long-lived assets (Note 6) |
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
Amortization of debt issuance costs (Note 7) |
|
6 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Ransomware incident (Note 9) |
|
2 |
|
|
|
|
|
|
|
|
|
|
|
Tax effect of Non-GAAP adjustments (Note 13) |
|
— |
|
|
|
32 |
|
|
|
|
|
|
|
|
|
Non-GAAP |
$ |
114 |
|
|
$ |
16 |
|
|
14.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31, 2023 |
|
Twelve Months Ended December 31, 2022 |
|
(Loss) Income Before |
|
(Benefit) Provision |
|
Effective |
|
Income Before |
|
Provision |
|
Effective |
|
Income Taxes |
|
for Income Taxes |
|
Tax Rate |
|
Income Taxes |
|
for Income Taxes |
|
Tax Rate |
GAAP |
$ |
(1,928 |
) |
|
$ |
(87 |
) |
|
4.5 |
% |
|
$ |
433 |
|
|
$ |
100 |
|
|
23.1 |
% |
Excess and obsolete charge from discontinued product line (Note
1) |
|
13 |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
Acquisition inventory step-up (Note 2) |
|
— |
|
|
|
— |
|
|
|
|
|
52 |
|
|
|
— |
|
|
|
Acquisition and integration costs (Note 3) |
|
16 |
|
|
|
— |
|
|
|
|
|
52 |
|
|
|
— |
|
|
|
Restructuring (Note 4) |
|
20 |
|
|
|
— |
|
|
|
|
|
10 |
|
|
|
— |
|
|
|
Amortization of intangible assets |
|
295 |
|
|
|
— |
|
|
|
|
|
146 |
|
|
|
— |
|
|
|
Goodwill and intangible asset impairment (Note 5) |
|
1,902 |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
Gain on sale of long-lived assets (Note 6) |
|
(2 |
) |
|
|
— |
|
|
|
|
|
(7 |
) |
|
|
— |
|
|
|
Amortization of debt issuance costs (Note 7) |
|
24 |
|
|
|
— |
|
|
|
|
|
51 |
|
|
|
— |
|
|
|
Fees and expenses related to repricing of Term Loan Facility (Note
8) |
|
2 |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
Ransomware incident (Note 9) |
|
15 |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
Loss on debt extinguishment (Note 10) |
|
8 |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
Currency hedge gain (Note 11) |
|
— |
|
|
|
— |
|
|
|
|
|
(5 |
) |
|
|
— |
|
|
|
Reversal of indefinite reinvestment assertion (Note 12) |
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
(30 |
) |
|
|
Tax effect of Non-GAAP adjustments (Note 13) |
|
— |
|
|
|
156 |
|
|
|
|
|
— |
|
|
|
65 |
|
|
|
Non-GAAP |
$ |
366 |
|
|
$ |
69 |
|
|
18.9 |
% |
|
$ |
731 |
|
|
$ |
134 |
|
|
18.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
MKS Instruments,
Inc.Notes on Our Non-GAAP Financial
Information
Non-GAAP financial measures adjust GAAP financial measures for
the items listed below. These Non-GAAP financial measures should be
viewed in addition to, and not as a substitute for, MKS’ reported
GAAP results, and may be different from Non-GAAP financial measures
used by other companies. In addition, these Non-GAAP financial
measures are not based on any comprehensive set of accounting rules
or principles. MKS management believes the presentation of these
Non-GAAP financial measures is useful to investors for comparing
prior periods and analyzing ongoing business trends and operating
results. Totals presented may not sum and percentages may not
recalculate using figures presented due to rounding.
Note 1: We recorded an excess and obsolescence inventory charge
related to a product line that is being discontinued.
Note 2: Costs of revenues included the amortization from the
step-up of inventory to fair value as a result of the Atotech
Acquisition.
Note 3: Acquisition and integration costs primarily related to
the Atotech Acquisition.
Note 4: Restructuring costs during the three and twelve months
ended December 31, 2023 and the three months ended September 30,
2023, primarily related to severance costs due to global
cost-saving initiatives. Restructuring costs during the three
months ended December 31, 2022 primarily related to the closure of
two facilities in Europe and movement of certain products to low
cost regions. Restructuring costs during the twelve months ended
December 31, 2022 primarily related to executive payments made
related to the Atotech Acquisition, severance costs due to a global
cost-saving initiative, the closure of two facilities in Europe and
movement of certain products to low cost regions.
Note 5: During the three months ended June 30, 2023, we noted
softer industry demand, particularly in the personal computer and
smartphone markets and concluded there was a triggering event at
our Materials Solutions Division, which represents the former
Atotech business, and Equipment Solutions Business, which
represents the former Electro Scientific Industries business and is
a reporting unit of our Photonics Solutions Division. We performed
a quantitative assessment which resulted in an impairment of $1.3
billion for our Materials Solutions Division and $0.5 billion for
our Equipment Solutions Business. In addition, during the three
months ended December 31, 2023, as part of our annual goodwill and
intangible asset impairment analysis, we recorded additional
impairment charges of $62 million for our Materials Solutions
Division and $13 million for our Equipment Solutions Business.
Note 6: We recorded a gain on the sale of a minority interest
investment in a private company.
Note 7: We recorded additional interest expense related to the
amortization of debt issuance costs associated with our term loan
facility.
Note 8: We recorded fees and expenses related to the repricing
of the USD term loan B under our term loan facility.
Note 9: We recorded costs, net of recoveries, associated with
the ransomware incident we identified on February 3, 2023. These
costs were primarily comprised of various third-party consulting
services, including forensic experts, restoration experts, legal
counsel, and other information technology and accounting
professional expenses, enhancements to our cybersecurity measures,
and costs to restore our systems and access our data.
Note 10: We recorded a charge to write-off deferred financing
fees and original issue discount costs related to the repricing of
the USD term loan B under our term loan facility.
Note 11: We realized a gain from a euro currency contract used
to hedge our financing in connection with the Atotech Acquisition.
The contract expired on January 31, 2022.
Note 12: We no longer intend to indefinitely reinvest earnings
of our foreign subsidiaries after the Atotech Acquisition.
Additional income tax expense was recorded to reflect an estimate
of withholding taxes that would be due on repatriation of prior
period earnings.
Note 13: Non-GAAP adjustments are tax effected at applicable
statutory rates resulting in a difference between the GAAP and
Non-GAAP tax rates.
Note 14: In the fourth quarter of 2023, we modified our
definition of Adjusted EBITDA to exclude other expense, net from
this Non-GAAP measure. Other expense, net primarily relates to
changes in foreign exchange rates. We believe this change enhances
investor insight into our operational performance. We have applied
this modified definition of Adjusted EBITDA to all periods
presented.
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