Steve Schwartz - President & CEO
Martin Headley - EVP & CFO
Atif Malik - Citigroup
Brooks Automation Inc. (BRKS) Citi Technology Conference Call September 4, 2012 3:45 PM ET
Atif Malik - Citigroup
Let’s get started here. My name is Atif Malik. I am part of the specialty semiconductors at (inaudible) team at Citi. It's my pleasure to welcome Steve Schwartz, CEO of Brooks Automation and Martin Headley, CFO at Brooks Automation. Steve is going to give a presentation on the company and then we're going to have a Q&A session. Steve?
Thanks very much. I will just give a brief presentation. Actually, Martin and I will share the duties here. We will step quickly through just to give you an update on things that are going on at Brooks. Really wanted to highlight pretty significant growth opportunities here at Brooks and very specifically the means by which we are going about growing the company and I think you will see very different from who we’ve been and where we’ve been over the past couple of years.
First, I want to talk about things that are unique growth opportunities for Brooks. One, we have a very significant market position, market presence in and around semiconductor and adjacent space. These are things related to automation, the creation and monitoring of vacuum capabilities, that are essential for semiconductor and for what we call adjacent spaces and at the same time the expansion of what we call adjacent spaces that is MEMS systems, LED, the OLED and the wafer backend provides some pretty unique growth opportunities, so that we can participate.
We will also be participating in very high growth market segments and finally I would like to spend a little bit of time talking about the developing markets related to life sciences, where there is a convergence of automation and cryogenics, two core technical capabilities for the company that provide an opportunity to manage the cold compound and biological storage of samples that are essential to the development of personalized medicines.
So we have a very unique spot in a rapidly growing market, taking core capabilities from the semiconductor and adjacent space in to life sciences. This is an exciting area for the company and I think we have made great strides just one year in to the business.
So very specifically, in and around the semiconductor and the core businesses for the company, we participate in available market of about $1.5 billion and we have about 30% market share. The capabilities for the company are around robotics, both atmospheric and vacuum handling robotics, the creation of vacuum by cryogenics and we have cryochillers that are used to create vacuums in much larger spaces than are required for semiconductor and those are things that are related to active displays for tablets and mobile devices if you will.
We have capability of vacuum instruments, a very high gross margin business, a very profitable vacuum instruments in Longmont, Colorado and we are a significant global service capability around the world that between the life sciences and the core businesses for the company is running now more than $90 million per year for service and support.
We add to that this new market segment I mentioned earlier, Automated Sample Management, it’s market size right now about a $150 million. So it's relatively small market growing at approximately 20% per year. We have market share today of about 40% that we're winning almost 60% of the new opportunities to come. So we fully anticipated that as we continue to participate in this business, as we develop new products that organically that we will be able to grow our position in this market in this fast growing market by at least 20% per year.
Let me spend a moment now talking about the key drivers in the core businesses for the company, that is the semiconductor and adjacent space. Every time there is semiconductor content, semiconductor front end we participated in the ways that we always have for Brooks for automation and for vacuum capability.
When we look at the adjacent spaces, the form factor actually has a very big impact for us. So we have the semiconductor content whether it's on a laptop or a PC or a tablet, but when we talk about the mobility aspect of this, when we talk about the display, we have applications related to vacuum for the coating of the display, when the accelerometer keeps the image upright. We have MEMS devices that we participate in. For the lighting of the screens, we have LED applications and so when we look at the semiconductor content, we are participants just like we used to be.
But when we talk about the mobility capability here, it adds significant amount of growth opportunity for the company and in particular when we talk about the things that we do with robotics and with cryogenics, everyone of the adjacent spaces gives us additional opportunities.
So when we look at a $1.5 billion [same], when we look at the growth opportunities that exist over the next three years, that will be incremental approximately $300 million of opportunities associated with the adjacent spaces.
We also see that there is a longer-term opportunity that exists in the move to wafer shift from 300 millimeters diameter to 450 millimeter as this is a pretty abrupt discontinuity in terms of the automation, in terms of the requirements of the systems of the robotics and of the cryogenics, it will require new products in every area and at the EUV lithography, although it’s difficult for us to say exactly what the incremental opportunities will be, we know that from a cleanliness standpoint that it might provide the opportunity for an increase in vacuum requirements.
So we pay close attention as we continue to watch EUV unfold in the marketplace. It’s a very significant market growth opportunity that exists in the markets where we participate today and I will talk just a moment about how we are addressing some of these with the resources for the company. We spend a lot of time every quarter on the earnings call talking about the design end wins for the company. We are investing significantly in R&D around the design end wins for our capabilities in each of the opportunities that comes up.
So I show here a pattern over seven quarters, we had 140 new design end wins and a design end win happens when a customer gives us an order for a new technology win, that we put into one of their systems. So, on an average of 20 wins per quarter, just slightly more than half are related to adjacent markets. So although the bulk of the revenue for the company comes from semiconductor front end, a majority of the wins and the activity, we have a lot market penetration and share gains related to adjacent markets.
The design end wins are extremely important for us, but I want to talk a little bit about the cycle here. Typically we spend three to nine months with the customer. Sometimes we spend years with a customer and nothing will come, but typically when we get a design end win, we will spend three to nine months with the customer getting spec in and getting design in until we get an order.
From that point, the customer will order a system and sometimes they will order two or three more of that component. They will put into beta systems, they will ship it to the field for test in the factory and the customer and the period is usually is about one year to two years from that point when a customer begins to order volume.
So if the system is successful, it's been proven successfully in a beta site, then the volume will come. So when we look at seven quarters of history here, in the design end wins that we have been tracking and we've imposing upon the market, we are just now beginning to see some of the longer term wins create business for the company. The reason, the design end wins matter is the relatively infrequent, design change for an OEM is relatively expensive.
So it's something that once they have proven a capability and they don’t like to repeat and these are sticky. Once you win that particular tool, typically the tool has a life of somewhere around 5 years and so once you are designed in, unless something goes wrong typically you can hold share and hold position for 5 years. So the reason make the investments today is that we know that over a period of 5 to 7 years that will continue to drive revenue for the company.
When we look at a measure of how we are doing against the design win capability and what the implications are from a market share, we have made a figure of merit here if you will that we look at the year-on-year revenue change, for the most recent five quarters for the company. So for example here, the June 11 23% here is that when we compare Brooks revenue in June 11 from Brooks revenue in June quarter 2010, we were up 23% year-on-year from the comparable quarter.
We compare this with an index against people who are considered to be our peers, that's Advanced Energy, Integra, MKS Instruments and you see TT. When we look at year-on-year changes in revenue for us compared to the peer group of people who are sub suppliers, sub system suppliers to the industry, we begin to see a divergence here.
So we can recognize the share gains, we can recognize the relative revenue improvement from the gains that we are beginning to achieve. So we'll continue to monitor this as we go forward, but we are confident in the share gains and the position that we have taken in the semi frontend and in the adjacent space.
When we look at the relative market opportunity and we see a $1.5 billion market opportunity growing to somewhere in the $1.8 billion to $2.1 billion range and as we continue to gain share here, provides very significant opportunity for Brooks to participate more meaningfully in a market that's very attractive to us and growing.
So we continue to make the kinds of investments that will allow us to be significantly stronger in and around the space that’s the core of our business.
I want to switch a little bit here toward Life Science Systems and I am hopeful I can bring you back to why it's actually somewhat related. We begin to look at other opportunities for the company to take advantage of core technical capabilities that we have related to robotics and cryogenics.
We looked at different verticals that provide significant opportunity and we found in the Life Sciences space, actually the convergence of robotics and cryogenics simultaneously, as today there are about a billion samples that are stored in cryogenic systems around the world.
Most of them are stored in manual freezers or in liquid nitrogen based [dual] systems but it is really hard to track a billion samples reliably and to make sure that when you handle them manually, that there are significant quality when it comes to point of use or point of need.
So I will go a little bit more quickly here. There is a small market, as I mentioned, $150 million worth of cumulative annual growth rate greater than 20% but it set up particularly well for Brooks as the requirements of this market call for more automation, call for colder smaller systems and there are very significant engineering challenges around making colder smaller systems for the storage of biological sample, we've invested ourselves because we think we’re uniquely positioned with the expertise both in cryogenics and automation to be able to add something to this market which has just begun to transform itself from a manually based market to an automated market.
To get started here, we acquired two companies we acquired [RTS] Life Sciences in April 2011 a small based in Manchester UK and we acquired Nexus Biosystems which at the time was the leader in automated sample storage at minus 80 degree C. Historically, most of the sample storage have been under minus 20 which is adequate for compound stores for pharmaceutical companies when you get the biological sample they have to be cold, we acquired Nexus Biosystems when we acquired at a time that's all based of 180 systems installed around the world at a 100 different customers including all top 20 pharmaceuticals companies.
And in fiscal ‘12, we’ve booked $63 million of business in the first 12 months. At the time we acquired the companies they are trailing 12 months’ revenue for the companies was $48 million. So we've been able to see appreciable growth in our ability to capture business here and we're very confident about what it looks like into 2013-2014.
Just to give you a quick look at installed base, important point to note here is the blue bar represents compound stores. These are typically minus 20 degree stores. Historically, most of them where sold to pharmaceutical companies that orange bar you see on top of this accumulated counts and systems in the field is for minus 80 bio stores. So significantly the pharmaceutical compound storage continue to be steady, the accelerated growth comes from the storage of biological samples and we see this is the real opportunity for Brooks as we into automated sample management in the bio store side of the business.
One year into the business, we see that the bio storage demand continues to grow exponentially, automated solutions are preferred. There is a pretty big (inaudible) that people use to buy in $20,000 freezers but when they accessed the million sample they can store the footprint of total cost of ownership, the accuracy precision and safety of sample well in compare total cost of ownership; it’s a very compelling argument. We are also finding that sources of research money that fund the storage examples are encouraging the people who want to win the storage business to go toward automated sample management, the dynamics that’s helping to change our footprint in the business.
Our market position is very strong; we continue to win more than 50% of the business probably closer to 60% of the new automated source and this is a starting point for us as automated sample management company when we look at the entire cold change, the management of samples from the extraction of the patient to the point of use to point of need, there is a significant opportunity for us going forward beyond the cold store to manage the transport to tracking the data management and the temperature profiling history of the entire sample so it gives us an opportunity as we look beyond just the automated cold store in the coming years to participate in the market that we estimate to be closer to $2 billion in an around the management of high quality sample.
So when we super impose the life sciences opportunity on top of the semiconductor growth we see that we get about a 70% growth in the total [stem] from 2011 to 2014 very attractive opportunity for the company and we think we have invested ourselves adequately to be strong participants in the game share both in the life sciences and the semi and adjacent space. With that I will turn microphone to Martin.
Thank you very much Steve. What we have here is the quarterly revenue history of the company without the contract manufacturing business we divested in June of 2012 and see the cyclical nature of the (inaudible) the semiconductor business we were about approximately flat in the semi frontend products business in the last quarter and we have actually guided down that business to 25% of the overall business for the fourth quarter of 2012 in the light of the current environment. Pretty steady services business and life sciences business generally picking up since we have grown it. You see that the adjacent business, it took a step backwards in fiscal 2012 with some extreme capacity, overcapacity situations in LED and solar but we pulled out that business back from its level in 2011.
In terms of our operating performance again, we are looking here at the business without the contribution from contract manufacturing business if you take our published financial statements, it presents a somewhat different picture since we are not able to create a contract manufacturing business as discontinued operation. So from a ‘10 to ‘11 we grew from $438 million to $551 million and for the trailing 12 months through June, I pull back slightly to $531 million with the seasonal decline in the business by perhaps characterize it in the back part of calendar 2011.
Gross margins achieved its highest 37.7% down a bit from 34.7% in the current year. We had a challenge there with mix which I will go into a little bit more as I talk about how we go to go from our current levels of 33% to 34% gross margins towards our targeted 40% gross margins. You see that we scale back R&D significantly as part of survival mode in 2009.
We're running about $29 million of R&D through 2010. As we ramped up to support the IWs and partial year of the Life Sciences business, we were at $38 million, our current run rate is about $48 million R&D spend. We feel very comfortable about that. That’s about $40 million associated with semiconductor and adjacent markets and about $8 million associated with Life Sciences. That’s a slightly higher percentage of sales, that we see is necessary for a long-term sustaining business in Life Sciences.
At the moment, the development is oriented towards smaller colder store solutions that we think are extremely critical to meeting the customer requirements that Steve laid out earlier in the talk.
Overall, our operating profit before special charges for the last 12 months is $33 million, down from $73 million on equivalent basis in 2012. We've had pretty consistent cash profit drop through. So that decline is driven mostly by the impact of revenues. The chart shows how the adjusted EBITDA tracks revenue influence in the period from early part of this chart through the third quarter of last year by the 11% gross margin business, the contract manufacturing business that we then divested and the semi mix of the elements that has slightly depressed the drop through in our cash profits in the current year.
What are we doing to drive those margins forward? Well, first, supply chain consolidation and [citing] sourcing initiatives that are well underway. We've borne some significant expenses associated with consulting help over the course of the last five or six quarters and we now have some very significant benefits locked in, at such a time as we can get them approved by our customers.
We also have higher gross margin in Life Science Systems business. This business is currently about 40% gross margins. We targeting the business to have close to 45% gross margins in the future. We have footprint rationalization in our Life Sciences business that assist us in that. And we're also looking very stringently at some end of life product actions that are necessary. We've had issues associated with some products requiring redesigns with some outdated electronics.
Against that, the mix in our frontend semi is been predominately towards some lower end margin pieces of our semiconductor business favoring the atmospheric products. Our atmospheric products, the atmospheric robotic products are much more of a commodity type of product as compared to the much high complexity and challenges of doing vacuum robotics and cryo pumping. And the particular mix of solutions required by our customers in the current year has favored those atmospheric products much more so than we've seen before.
The supply quality and inefficiency impact from that have had an impact as have long-term pricing roadmaps that we are working with some of our major OEMs. However, the net impact is the positive gross margin impact with these many projects that are in motion and they should drive us towards that target that we previously referred to.
In terms of our earnings performance again very confusing in the sense that if you just look to our GAAP net income went from 60 million in 2010 to 130 million in 2011 and trailing 12 months stands at 33 million. Within 2011, we had a significant gain on the sales of the contract manufacturing business. 2010 we also had a significant gain on sale of some IP associated with the residue of our automated material handling systems.
We've also had one or two things around taxes et cetera. If you take all of these unusual items as our adjusted EPS or pro forma EPS that it were has been $0.79 for 2010, up to $1.35 last year and just shy of $0.60 in the trailing 12 months.
Current market trends. We are seeing a longer and deeper pull back in semiconductor frontend. At the moment it feels too early to call bottom, although the indications are that there ought to be some resumption and pick up towards the end of the December quarter. We have nothing in the way of orders or manufacturing plants from key OEMS to support that at this time.
There is a stronger outlook for calendar 2013 capital spend with a strong year for equipment spend likely from Intel and TSMC having just announced a capital expenditure.
Backend wafer handling is a promising new area and one that we feel very excited about and we continue to see a lot of initiatives working in this area even in this slow environment. In the longer term we are very pleased by the likelihood and level of assurance associated with 450 millimeter utilization and introduction with some of the recent investment activities you will see.
And we can see from our own interactions with our customers, those activity remains very robust. We have already sold 450 millimeter systems to 9 customers at this stage, for their development efforts. And as Steve says, our Life Science business remains steady and the opportunity pipeline is continuing to build. So very briefly, significant growth opportunity in the markets we serve, we are well positioned to grow in those growing positions.
We have got the actions in place to start moving along the way towards to our targeted growth margins of 40%. We've got a very strong balance sheet with over 200 million of cash to support the value and the vision towards that growth, no debt. And we currently have in place a dividend program that provides over a 4% yield. Unfortunately it wasn’t targeted at that level by virtue of where our stock is currently priced. And so with that, thank you very much for your attention and interest and I will pass back to you.
Thanks there Martin and Steve. I have three questions we are asking all to all the related companies that are in conference this year and let me start off with those and then we will dive to Brook specific questions and how would you characterize the current demand environment for your products and services versus the first half 2012. Is it better, worse or the same?
Yeah I think well that question is [worth]. I think the bookings environments is down, I think we’re probably in between the extremity, you heard from people reported already. So, better than some of our end customers and even some of the peers, not as robust as what's going on in inspection metrology and lithography. So order patterns down, not to levels that we were in a couple of years ago but the back half is slower. We continue to hear that maybe by the end of the year, order patterns will pick up, but as Martin mentioned, if our customers are doing turns and we're doing turns business, we might get a late low even it does happen in December.
Atif Malik - Citigroup
And with geographies, would you get prices as worse than your product?
We're largely; lot of our business is driven by North American OEMs. So that's probably very representative as our any equipment company at least on the semiconductor side, without question that’s a bit slower. It's almost application-by-application. So again metrology is healthier than [CVD] or some of the other front end processes, the life sciences is really unrelated to this and that’s much steadier business right now from an order pattern standpoint and has a little bit longer cycles and it's different from environmental impacts rather customer-by-customer, their ability to fund large capital purchase.
And then Martin, can you rank the intended use of cash in terms of priority buyback, dividend, acquisitions or [nothing] from here?
Alright, we got $200 million of cash clearly the number one priority is maintaining our dividend program. Currently, we absorbed about $21 million, $22 million a year. Secondly, given that we have a strong cash machine where the adjusted EBITDA that you see that we developed in relatively moderate capital expenditure needs we will spend less than $10 million on CapEx in fiscal 2012.
We then have surplus cash flow to work and our intend is to look at smaller size acquisitions that can support our growth efforts in Life Sciences Systems along the areas that Steve identified in terms of building out propositions in the cold chain and we know to make you sample management.
And secondly and maybe filling some other gas will get us to market positions more quickly in areas such backend semiconductor. And those are all principal uses of cash at this time.
Atif Malik - Citigroup
Okay. And then starting with your products business, you mention on your call that we've been continued customer acceptance delays in the high margin product business group on the vacuum side. Now this qualification delays on the Brooks side or not [meaning] to certifications of the delays in the OEM road map?
These are largely around the supply chain activities that on supply consolidation activities I briefly made mention on in the prepared remarks, whereby we have secured significant improvements who actively working with our supply based consolidate or to move other supply chain into lower cost regions.
But in our industry these would required for the exact pass of the acceptance those acceptance do require a fine degree of work from our customers and so there is an element of then being able to devote that resource to the acceptance of those that we can break this new supply chain elements into our products offering.
Atif Malik - Citigroup
Okay. And then a bigger picture on EUV and how should we think about the impact of EUV if any on Brooks’ vacuum products and mix?
We are not sure how much impact at the moment, but we assume we need to pay attention to is there pretty stringent contamination requirements that we are aware of and one of the way to deal with it may indeed be by additional vacuum steps. So some of them will pay an attention to costs into the industry EUV by itself is doing that at the outset but it will be more economical and so we are going to pay attention to see if their [cleanness] requirements with a vacuum might be necessary.
Atif Malik - Citigroup
Thank you. And then we could ask this question from investors, there is a little bit of confusion on the 450 millimeter for component suppliers the transition to larger wafers is from 300 meter in terms of the unit count of (inaudible) equipment, how does this impact looks in the long run?
I think the same was 300 millimeter I think everybody anticipated that we went from 200 to 300 necessarily it would reduce the count but if you don’t take into account the volume increases in the consumption of silicon, it’s an unfair comparison I think, at the same time because of the nature of consolidation because of the costs to get in or costs even be in the business, there will be fewer suppliers as well, so the opportunities for us continue to gain share continue to gain position and supported industry that drives on driving down Moore’s Law and making the cost of electronics cheaper and cheaper pushing more silicon and drives more volumes. So what we are bullish about it is we understand the inherent demand changes that come as a result of going to 450 but same was with 300 millimeter and did many good businesses for us.
Atif Malik - Citigroup
And then with the life sciences business, the business is down 27% quarter-on-quarter in the September quarter and lower European demand and some share loss, and how much of the share loss, I mean how much of this decline was share loss related and how much we kind of like the macro related?
I think it is a little bit tough to compare the loss in one system and call share loss. We want to win them all especially the one that was in our sweet spot, so we didn’t, which we [haven’t] loss in one system was there, mostly it’s some of the opportunities there were not, we win a majority of the systems that come up and the one that we announced on the call that was right in middle what we do best, so that was a pretty unfortunate one but the nature of the market one system here or there $10 million or $15 million dollar markets can really swing it, so the nature of the system probably was $1.5 million out of $11 million revenues to give you an idea.
And it was more significant in that quarter given that the funding environment in Europe had somewhat squeezed the pipeline of opportunities we are coming through. We thought it is although more important towards in that particular quarter and it would have been, if you have more normalized levels of opportunities coming through from Europe.
We are not too concerned about that going forward because in our own mind the biggest level of activity is to know which will be in the US and secondly, the greater growth opportunity we always consider to be in Asia which started behind Europe, Europe having been advanced a lot by the position of farmer in Europe but there is high degrees of interest and activity in Asia and we can see that, that will be a strong growth area and even constrained by those kinds of funding issues at the moment.
Okay, and the 20% compound annual growth rate, is that predicated on the existing chiller business or the new products that you guys are thinking of adding to keep that growth rate, Steve.
Well the market itself is providing that kind of opportunity for growth, so we will grow beyond that. So we think that there are other things to add to the cold chain, that we will continue to add to the company to support further growth in the business, but the organic growth opportunity that exist in the business that we've already acquired is 20%.
Okay, and the adjacent markets, the core semi market has been pretty stable for you guys, but the adjacent markets have not being doing so well. The solar, the LEDs and the display side and I am wondering if what kind of decision trees are you guys looking at in terms of exiting some of those markets and catering more towards life sciences and those areas?
Yeah, so we’re designed in where we are. So when those businesses come back, we're in a good position. So if LED begins to pick up or MEMS begins to pick up, we're not making additional investments if you will. So when we get an order, we're designed, we're ready, we’ll launch parts, assemble and ship.
So we don’t intend to get out of them. The question is when the next or the next or the next design comes up, we'll pay close attention to which ones we want to go pursue, but we’re designed in to businesses that as they come back, we'll be in a good spot. So we like those and we think the adjacent markets are important. We think the form factor for mobility really does drive a lot of opportunity for us and we're hopeful about improvements in LED. There is just a lot of capacity put in to place. And so we’re still waiting for that to come back, but without spending money.
Atif Malik - Citigroup
Okay. And then you mentioned in the call that not after 15% to 20% revenue decline in the September quarter where things could kind of rebound in December or March and was that kind of based on how bad things have looking into September and mathematically it has to be up or early in science you mentioned in (inaudible) CapEx commentary that kind of told you that indeed there is some kind of rebound coming?
Well, we can see here about OEM received any order. So we remain bullish, we think that the industry is poised to be able to add pretty significant capacity. We understand from the capital spending plan that customers have announced that there is good potential but a specific timing is as yet uncertain. So we continue to hear that perhaps by the end of the calendar order patterns will pickup we are hopeful. Looking at (inaudible) are right now. So we just don't now.
Okay. Let me see if there is any in the audience?
(inaudible) over the next three years and what inning are you in with regard to fixing this (inaudible)?
What are, I am sorry.
For the supply chain part of your story.
Okay. So on the Life Sciences part, we've already communicated that within three years we like it would be at least 20% of the company’s revenue. And probably the most significant part about that is that's why we're going core business for the company. So we want to continue to grow and make the investment since make it under adjacent and at the same time make Life Sciences at least 20% of the company.
So that's a good challenge in friendly but we're up to and we are moving forward on it. The supply chain activity as you were internally pleased but we are running [short] for it, frankly and so it’s to put a final point of at what Martin said, we've designed and build lower cost components that we can currently sell to all of our customers, issue that we have is until they qualify it and say yeah this is a product that goes into Intel or Toshiba’s [lab] but we can’t recognize their lower costs part of the supply chain.
So the activity the way we spent the last 18 months is really working hard on that, we have got to get it qualified because we can’t get a lower cost product and until the customer says sometime we can push, everybody understands this is. They are not dragging their feet either because they understand that they get some price concessions as a result of us getting some costs down, it just takes time and if you changed enough components that are significant enough in a reasonable period of time even if it’s simply switching vendors, it is a new part and it requires a new (inaudible) it’s just taking some time. And our customers are very supportive of us, it takes some time, what they have go through, what they have to foresee endures us go through in such time same kind of confessions. So we are confident about it because we have done it and now the question is how do we get it to show up on the bottom line and that those are the challenges and when Martin says we are just not there, we are just not there yet, but everybody is working it’s not being held up by anybody, it’s just taking time. Did that answer your question?
Two short questions, are you done in terms of the asset reshuffling? The first one and second one, can you talk to the synergies in all those divisions I mean from R&D standpoint and from a sales and marketing standpoint?
Sure. We are probably never be done with assets shuffling continue to more towards the kind of company we want to be when I talk very specifically about that may be address second part of your question. We are very confident with the level of R&D spend that we have which you will see likely is movement from sustaining engineering perhaps the new product development sometimes in the core semiconductor feasibility may be into Life Sciences, but the way we take advantage of the real core capabilities of the company are the challenge that exits in Life Sciences related to automation and core simultaneously and that’s something we do not do in semiconductor, so we have robotic experts from the heart of the company we have cryogenic experts from the company helping to define the next generation of Life Sciences that’s really a Brooks’ product designed and comes from Brooks as a result of the help from the people that came to the company as a result of the acquisition and people who will support the robotics for 30 years and cryogenics for the past 30 years.
So we think those are real opportunities for the company and there may be some in service a very little in support and of course their synergies come from the support of administration inside the company.
But the asset management, we have done a major changes if you will divesting of the contract manufacturing business, but as Martin mentioned, there are other acquisitions that likely will become part of the company in the future and we will continue to manage the growth opportunities based on what opportunities was presentable when we [thought] about those acquisitions for sure.
Okay. We are almost passed our time. Steve and Martin thanks for coming to the conference.