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spk02: Good day, and thank you for standing by. Welcome to the MKS Instruments fourth quarter and full year 2022 earnings conference call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during that session, you will need to press star 11 on your phone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded, and I would now like to hand the conference over to your speaker today, Mr. David Rizek. Mr. Rizek, please go ahead.
spk10: Good morning, everyone. I am David Rizek, Vice President of Investor Relations, and I'm joined this morning by John Lee, President and Chief Executive Officer, and Seth Backshaw, Executive Vice President and Chief Financial Officer. Yesterday, after market close, we released our financial results for the fourth quarter and full year 2022, which are posted to our investor website at investor.mks.com. As a reminder, various remarks about future expectations, plans, and prospects for MKS comprise forward-looking statements. Actual results may differ materially as a result of various important factors, including those discussed in yesterday's press release and in our quarterly report on Form 10-Q for the quarter ended September 30th, 2022. These statements represent the company's expectations only as of today and should not be relied upon as representing the company's estimates or views as of any date subsequent to today, and the company disclaims any obligation to update these statements. During the call, we will be discussing various financial measures. Unless otherwise noted, All references to combined company financial measures reflect the combined results of MCAS and Out-of-Tech Limited, which MCAS acquired on August 17, 2022. Also, unless otherwise noted, all income statement-related financial measures will be non-GAAP other than revenue. Please refer to our press release and the presentation materials posted to the Investor Relations section of our website for information regarding our combined company results non-GAAP financial results, and a reconciliation of our GAAP and non-GAAP financial measures. As a reminder, in the fourth quarter, MCAS updated its end-market classifications, including replacing advanced electronics with electronics and packaging, reclassifying products and services supporting light-emitting diode, laser diode, and solar markets from electronics and packaging to specialty industrial, and reclassifying material solutions division products and services supporting wafer-level packaging from semiconductor to electronics and packaging. For a detailed breakout of reported revenues by end market, as well as out-of-tech and combined company revenues by end market, please visit the investor relations section of our website. Now, I'll turn the call over to John.
spk09: Thanks, David. Good morning, everyone, and thanks for joining us today. We ended 2022 on a strong note, with revenue and EPS exceeding the high end of our guidance range. Of course, the first quarter did not begin the way we expected. On February 3rd, we identified that NCATS had been a victim of a ransomware incident. We took immediate action to contain the incident, which has materially impacted our business systems as well as the operations of our Photonics Solutions Division and Vacuum Solutions Division. including our ability to process orders, ship products, and provide service to customers. The operations of our material solutions division were not impacted. Today, we're well into the recovery phase, and we've begun starting up the effective manufacturing and service operations, and we expect these operations will be restored over the coming weeks. We plan to provide a more complete picture of the costs and related impacts of the incident on our first quarter earnings call but we do expect there will be a material impact on our first quarter performance. Our main focus today, of course, is on ramping up our production and service operations to meet the needs of our customers. I do want to take a moment to reflect on how enormously grateful I am for the efforts of the entire NKS team, from leadership to all key functional departments, in responding to and managing this situation. You always hear that the best prove the metal in the toughest moments, but you often don't get to see that. I'm extremely proud of the unprecedented responsiveness, stamina, innovation, and resiliency demonstrated by our teams. I also want to thank our customers, suppliers, and other business partners for their understanding, patience, and support through this difficult period. We're working hard to be fully back up soon, and I look forward to delivering on our commitments to all of you. Now, on to the business. I start by reflecting on the major milestone of 2022, which of course is the addition of Adatech to the NKS portfolio. Adatech's critical process chemistry and equipment solutions across our electronics and packaging and especially industrial markets further strengthen our position as a foundational technology solutions provider. We hit the ground running with Adatech. Our integration efforts have been progressing extremely well. And our initial engagements with major PCB manufacturing customers have been very positive. We look forward to demonstrating the value of our company's broader and unique capabilities to all of our stakeholders. 2022 also marked another record year for our semiconductor business, highlighted by strong demand across our vacuum and photonics portfolios. Our customers count on our broad domain and process expertise to solve their most complex challenges. We are uniquely positioned in the semiconductor capital equipment industry as MCAS solutions are used in over 85% of the steps needed to manufacture a semiconductor chip. Operationally during 2022, our global team navigated well through continued supply chain constraints and significant inflationary pressures. I'm proud of how we executed to meet those challenges while remaining focused on innovating across our portfolio to solve the industry's critical technology challenges. While we believe macroeconomic challenges along with expected pressures in WSE investment will persist this year, our 2022 achievements, combined with our leadership across a broad array of end markets, should significantly enhance our long-term potential to deliver sustainable and profitable growth within an estimated $25 billion addressable market. Now let me discuss our results in more detail. We delivered fourth quarter revenue of $1.09 billion, adjusted EBITDA of $282 million, and net earnings per diluted share of $2. Sales to our semiconductor market exceeded our expectations as we executed well in responding to supply chain constraints and delivered on shipments better than anticipated. Our photonic solutions revenue set another record, reflecting continued customer traction and market penetration in advanced lithography, metrology, and inspection applications. We were pleased to see our optical solutions business continue to gain traction across the EUV ecosystem for both lithography and inspection applications. Lithography, metrology, and inspection applications continue to grow as a percentage of our overall semiconductor revenue. And for 2022, our revenue from these applications grew almost 30%, outpacing estimated industry growth rates. We expect this will remain an area of growth and investment for MKS. Now moving to our electronics and packaging market, revenue was in line with our expectations of a sequential decline when compared to combined company results for the third quarter. As anticipated, softening in global electronics demand impacted sales of our chemistry solutions for advanced PCBs and packaged substrate applications. Sales of our flexible PCB laser drilling equipment remained muted in the quarter, as expected as customers continue to digest the strong growth and flex capacity added in 2020 and 2021. However, we saw encouraging signs of customer activity in our HDI PCB via drilling business. In the fourth quarter, we received a meaningful order for our geode HDI tool, and we are starting off the year well with a multi-unit order in the first quarter from a long-time Adatech customer. This is the first example highlighting the potential cross-selling synergies as we further integrate our businesses. For the full year, sales to our electronics and packaging market from the Adatek business grew by 3% when excluding the impact of foreign exchange and palladium pass-through. Overall, we're very pleased with Adatek's performance in a difficult near-term electronic device market. Turning to our specialty industrial market, revenue was also consistent with our expectations and flat sequentially compared to combined company results for the third quarter. Our general metal finishing business continued to be impacted by lower automobile production volumes due to lingering supply chain constraints. In addition, some of our GMF customers were negatively impacted by disruptions associated with COVID-19 in China in the fourth quarter. That said, when excluding the impact of foreign exchange and palladium pass-through, Adatech's GMF business grew 2% year over year in the fourth quarter and 4% for the full year. Looking ahead to the first quarter of 2023, because of the impact of the ransomware incident, we're not able to provide our usual guidance at this time, but Seth will provide some color shortly. In summary, our fourth quarter results highlight our solid execution in a challenging environment. 2023 kicked off with its own challenges that the ransomware incident has demonstrated. It also presents opportunity. As we execute on our recovery efforts, we will remain focused on our growth strategy across our end markets, which includes attractive revenue synergy opportunities. These markets feature powerful secular growth drivers. And as near-term industry headwinds abate, we look forward to capturing the valuable opportunities that lie ahead. Now I'd like to turn the call over to Seth. Thank you, John. I'll cover our fourth quarter and full year results and provide some thoughts for our first quarter of 2023, including the preliminary impact of the ransomware incident. Starting with the fourth quarter, we delivered revenue of $1.09 billion above the high end of our guidance range. Revenue was down 5% sequentially and down 6% year-over-year, each compared to combined company results of the previous period. This is due to the impact of foreign exchange fluctuation in plate and pass-through, Fourth quarter revenue grew 1% on a year-over-year basis compared to combined company results. Turning to our end market results, fourth quarter semiconductor revenue was $503 million, declining 6% sequentially and growing 2% year-over-year. Each compared to combined company results for the previous period, which was better than our expectations. Despite headwind from Patina supply chain constraints, as well as newly enacted U.S. export restrictions in the fourth quarter, our team executed very well in delivering to our customers. Fourth quarter revenue from electronics and packaging market was $266 million, a decrease of 8% sequentially and 19% year-over-year, each compared to combined company results for the previous period. Excluding the impact of foreign exchange and palladium pass-through, Fourth quarter revenue declined 11% on a year-over-year basis compared to combined company results. On a sequential basis, this decrease in revenue is primarily a function of lower chemistry revenue resulting from the softer global electronics demand. Electronics and packaging revenue may have 25% of overall revenue in the fourth quarter. As we mentioned in our recent analyst day, we have a unique opportunity to combine our capabilities to optimize the interconnect as packaged substrates and advanced PCBs require greater integration due to the trends of miniaturization and complexity. We are very pleased with the initial reaction in the marketplace of our combined laser drilling and chemistry capabilities. That reaffirms our belief that we can deliver meaningful revenue synergies from the combination of our two companies as customers begin to focus on next generation device design cycles. Moving to our specialty industrial market, revenue in the fourth quarter was $316 million, flat sequentially and declining 4% year-over-year, each compared to combined company results in the previous period. Including the impact of foreign exchange and palladium pass-through, fourth quarter revenue grew 3% year-over-year on a combined company basis. In the quarter, the specialty industrial market made up 29% of total revenue. As a reminder, our specialty industrial market utilizes our proprietary technologies in vacuum, photonics, and materials to serve a broad array of applications. This share of expertise allows us to tap into some attractive secular growth opportunities, diversifies our revenue, and comes with healthy margins in cash flow. In the fourth quarter, consumables and service revenue across the three end market categories comprise 37% of our total revenue, up 3% year-over-year on a combined company basis, including the impact of foreign exchange and palladium pass-through. Looking forward, we expect this revenue stream to provide greater resilience in our financial model as we enter a period of cyclical and macroeconomic softness. Our services revenue, in particular, showed strong momentum led by our semiconductor market. These results are a byproduct of the actions we took several years ago strategically reorganizing services to drive a more market-centric growth and profitability strategy. Turning to our margins, we reported a fourth quarter growth margin of 45.9% exceeding the height of our guidance range. We executed well in addressing continued supply chain constraints and inflationary pressures and also benefited from a more favorable product mix. Fourth quarter operating expenses were $242 million, up slightly from the midpoint of our guidance to the higher revenue volume. Fourth quarter operating margin was 23.6%, significantly above the height of our guidance range, due to strong operating leverage in our financial model, along with favorable product mix. Our integration of AdTech is progressing well, and we are on track to achieve our cost-to-energy target of $55 million within 18 to 36 months post-close. Fourth quarter adjusted EBITDA was $282 million, also above our guidance range. Adjusted EBITDA margin was 26%. Net interest expense for the fourth quarter was $75 million. This was slightly lower than we anticipated with variable timing of Fed rate increases relative to interest reset dates of our term loans as well as higher interest income. Our tax rate for the fourth quarter was 20%, better than expected, due primarily to refinement of acquisition-related valuations estimates in a favorable geographical mix of income. Net earnings for the fourth quarter were $133 million, or $2 per diluted share. Turning to our balance sheet and cash flow, consistent with our track record of due leveraging, we made a voluntary principal payment of $100 million in the fourth quarter. Exiting the quarter, we maintained strong liquidity with cash and short-term investments of $910 million and a revolving credit facility of $500 million. We exited the quarter with gross debt of $5.1 billion, which included a voluntary debt prepayment partially offset by revaluation of Euro denominated debt to a strong Euro in the quarter. Our net leverage ratio exiting the fourth quarter, which we calculated on a combined company basis, was 3.4 times, based on trailing 12-month adjusted EPTA. For the fourth quarter, operating cash flow was $184 million, and free cash flow was $130 million, Our capital expenditures in the fourth quarter were $54 million, an increase of $28 million compared to the third quarter, reflecting a full quarter contribution from Adatech. Consistent with prior quarters, we had a dividend payment of $15 million, so 22 cents per share. Moving to full-year 2022 results, revenue was a record $3.5 billion, up 20% year-over-year, so $2.9 billion reported in 2021. On a combined company basis with Adatech, revenue was consistent year-over-year. However, through the impact of foreign exchange and palladium pass-through, 2022 revenue grew 5% for the combined company. Semiconductor revenue set another record in 2022, totaling $2.04 billion, growing 12% year-over-year. For the impact of foreign exchange, semiconductor revenue grew 16% year-over-year. We've delivered strong growth across our portfolio of vacuum and photon solutions, reflecting our unique breadth in technology leadership. Electronics and packaging revenue was $1.1 billion in 2022 on a combined company basis. For the impact of foreign exchange, plug-in pass-through, combined company sales declined 8% on a year-over-year basis. Adtech's business performed well in the electronics and packaging market, growing 3% year-over-year, including foreign exchange and plating and pass-through. Specialty industrial revenue was $1.3 billion in 2022 on a combined company basis, excluding the impact of foreign exchange and plating and pass-through. Combined company sales grew 4% on a year-over-year basis. In 2022, on a combined company basis, the revenue split between our semiconductor and Latron's packaging, especially industrial markets, was 46%, 25%, and 29% respectively. Total consumables and service revenue amounted to $1.7 billion in 2022 on a combined company basis, up 5% year-over-year, with the effect of foreign exchange and palladium pass-through. In 2022, on a reported basis, operating cash flow was $529 million, and free cash flow was $365 million. I'll now turn to our first quarter outlook. To address the current status of our recovery from the ransomware incident, given that our effective operations are just starting to return to production and are focused on serving our customers, we're not able to provide a useful guidance for the first quarter. In addition, as you may have seen yesterday, we filed a notification with the SEC of an extension to file our 10-K. Even though we are in the process of restoring our systems, we require additional time to complete our annual report. As John noted, the incident has materially impacted our operations for our vacuum and photon solutions divisions. The operations of our material solutions division were not impacted. MSD revenues are spread across electronics and packaging in especially industrial markets. What we can share is that prior to the ransomware event, we were planning to guide total MCAS revenue for the first quarter to be approximately $1 billion. This reflected widely publicized circular softness in the semiconductor industry, offset somewhat by a strong backlog coming into the quarter, continued weakening in global electronics spending, impacted our electronics and packaging market, and a modest sequential decline in revenue, especially in the industrial market. We estimate the ransomware incident will impact our first quarter revenue by at least $200 million. However, we expect to substantially recover this revenue by the end of the second quarter. Prior to the incident, we're also expecting gross margins of 44.5% down from the fourth quarter levels due to lower volume and mix. In terms of operating expenses, we're also expecting approximately $260 million in the first quarter up from fourth quarter levels primarily due to seasonal increase in compensation and fringe expenses, as well as continued investment into product development and customer-facing sales and marketing expenses. Our ability to continue to invest in critical initiatives has been a key strategic driver behind our long-standing ability to exit cycles in a stronger market position to continue to accelerate our customers' product roadmaps. We plan to maintain these investments. We're also keeping a close eye on macroeconomic industry trends and a proven playbook for managing costs through cycles will allow us to adjust spending levels when and if needed. As an example, we've already executed approximately one-third of our $55 million ad tech cost energy target within just a short period of time. Just to run out of expectations prior to the incident, for the first quarter, we expect our tax rate to be 27%. We currently expect our net interest expense to be $78 million. With that, I'll turn it back to John to wrap up. Thanks, Seth. While the events of the last month have been an unpleasant distraction, they do not change the MCAS story. Following an important 2022 in which we closed our strategic acquisition of Adatech and delivered strong financial performance, MCAS is even better positioned for the future. We now address all of the core building blocks of advanced electronic devices, from the semiconductor chip to wafer-level packaging to the package substrate to the PCB, with enabling technologies that solve for miniaturization, complexity, and novel chemistry. And we do so with an enhanced business profile featuring the most comprehensive technology portfolio in the industry, spanning vacuum, photonics, and chemistry. market leadership in 20 critical product categories across a balanced end market profile, a resilient business model with a significant mix of consumable and services revenue, and a larger addressable market. For all of these reasons, we are confident that we are ready to capture a broader set of exciting market opportunities. Now I'd like to turn the call back to the operator for Q&A.
spk02: Thank you. As a reminder, to ask a question, please press star 11 on your phone and wait for your name to be announced. We also ask that you please limit yourself to one question and one follow-up. To withdraw your question, please press star 11 again. Stand by while we compile the Q&A roster. And again, we ask you to please limit yourself to one question and one follow-up. One moment for your first question. Our first question will come from Jim of Needham and Company. Your line is open.
spk07: All right. Thank you. Good morning. So if we look beyond the ransomware incident, and you seem to be suggesting you think you could pick up a significant amount of that revenue impact in Q2, I'm wondering if how we might think about some of the other metrics that you outlined in the Q1 guide prior to the incident. In other words, you know, should we think in terms of those kind of expense levels and margins? And again, I'm not looking for guidance for Q2, but you offered up this slide. I'm just wondering, you know, as we think beyond this into the June quarter, how we might think about some of these other metrics, other than interest expense, which you have given some cover on.
spk09: Yeah, thanks, Jim, for the staff. I'll answer your question. Yeah, I think you'll, you know, our view, we gave a little snapshot of the Q2 expected guidance prior to the incident, and so we gave you metrics for how to think of the business going forward. You know, obviously, we've got a much different platform in terms of more resilient revenue stream from unit-based chemistry and service revenue, We've got many opportunities to grow the business out of multiple markets, and we'll continue to invest in the areas that really drive product investment as well as customer-facing opportunities, like a sale to marketing. So we have a lot of opportunities we want to invest in, and our goal is to exit any cycle strong and worth, and we enter that cycle. So really no change in the business that John mentioned. This is kind of a Unfortunately, Q1 speed bumps for us are very important. We continue to get our customers up from operation side as well as the service side as well. But we're really focused on, again, growing the business in the long term, making those investments.
spk07: Okay. My follow-up question just relates to your specialty industrial business. If I heard you correctly, you're talking about a modest, I think, sequential decline in And I'm wondering, we don't have a lot of experience with that part of the business. Is that seasonal or is that macro related?
spk09: Hi, Jim. It's John. I'll take that. There is a little bit of seasonality to the automotive industry, but really it's end-demand driven. I think if you read about supply chain constraints in automotive, you can see that the first half – these expectations are that it's a little weaker in automotive than perhaps later. Of course, we don't know what will happen later, but really, that's really what's driving most of that.
spk07: Got it. Thank you.
spk02: Thank you. One moment, please, for our next question. Our next question will come from Sydney Hope of Deutsche Bank. Your line is open.
spk11: Great. Thanks for taking my question. I want to start off with the ransomware events. You talk about at least $200 million of revenue impact in the first quarter, and most of that will be recovered by the end of second quarter. If you double-click on that, is that mostly impacting the semi-business versus your other segments? And the other part of the question is, do you think any of the revenue is perishable, whether it's potentially losing share to a competitor, or that's an opportunity for your customer to cancel order based on what's going on in the broader market.
spk09: Thanks for the question. It's John. I would say that a lot of the revenue is of course semi-based and that's why, as you know, in the industry, you know, these critical subsistence that we make are co-designed with our customers qualified by their customers. and so really difficult to displace. And we've had relationships with these customers for decades, and they've been very supportive. So we feel that all this revenue is easily recovered in terms of designs. I think that there are other revenue that could be lost a little bit, but those are very de minimis, and we're really not worried about that, and we're going to try to get those back as well.
spk11: Okay, that's helpful. Thanks. My follow-up question is, if I look at the first quarter, you gave some color in the pre-randomware events, what you have guided, $1 billion down 8%. You gave a little comment on semi versus electronics packaging and specialty industrials. Just on an order basis, do you expect first quarter to be the trough for any of these businesses? Maybe you can comment on the backlog, what you're seeing into second quarter. Well, that would be great. Thank you.
spk09: Yes, Eddie. So we don't really comment on order rates, but I think that you can surmise that because we would have guided a billion, the strength of the backlog is really carrying that, especially for the semiconductor industry, as you mentioned. And so we're really happy with the strength of our backlog, that we would have done much better. As I said before, whatever gets lost in Q1 because of the ransomware event, we expect substantially will be made up by Q2.
spk02: Okay, thank you. Thank you. One moment, please, for our next question.
spk03: One moment.
spk02: Our next question will come from Chris Sankar of Cowan & Company. Your line is open.
spk05: Hi, thanks for taking my question. I have two of them too. First one, John, back to the prior question, you know, about pre-ransom, I would have guided a billion dollars. Thanks to the backlog. Is it fair to assume, you know, if you try to look at the, you know, the linearity to the year, your revenue should eventually follow the WFP pattern. In other words, your customers are lowering their inventory. So in theory, SEMI should start slowing as we progress through after Q1. Is that a fair assumption?
spk09: Yeah, Krish, I think that's a fair assumption, but I would point out, though, that because we're exposed to 85% of WFE, as you well know, you've covered these companies, not all of them are behaving the same way. Some customers of ours in wait-for-fab equipment are saying, you know, they're going to go down in Q1 or first half, and some have different rates at which they're going to go down. Some are saying, no, it's still pretty steady in the first half. And some are saying it's going up for the whole year even. So we're exposed to all those customers. So in general, you're right. If WFE goes down, we'll go down. Our long-term model has obviously demonstrated that we can outperform WFE by 200 basis points. But we're a much broader company now, and we're exposed to different parts of WFE. And so I think that just allows us to be a lot stronger supplier to the ecosystem.
spk05: Got it. Thanks, John. And then a follow-up for Seth. Seth, just curious with this ransomware impact on the revenue, how does that affect your term loan A covenants?
spk09: Yeah, as we talked about, in the X in the fourth quarter, our net leverage ratio is 3.4. Gives a lot of headroom relative to a 5.25 leverage covenant ratio, which is on the term loan A only, by the way. which is where we paid off the $100 million in the fourth quarter. So that coven's only tied to term loan A. That's $90 million exiting Q4. And looking ahead, we see headroom going forward as well. So that's an area we feel very comfortable with, quite honestly. That revenue moving from Q1, we believe substantially recovering Q2 will kind of offset that on a six-month basis. So we feel very comfortable with the covenants going forward. But we'll kind of lean into that term, loan A, as well, where we're going to kind of de-lever more aggressively. And I just want to come back to one comment I had before early on. I responded to Jim Rashudi's call. I meant to refer Q1 pre-ransomware information relative to Q2. So I just want to kind of clarify that point as well.
spk05: Thank you very much, Chris.
spk09: Yes, thanks, Rish.
spk02: Thank you. One moment, please, for our next question. Our next question will come from Joe Quattracchi, Wells Fargo. Your line is open.
spk06: Yeah, thanks for taking the question. I wanted to understand the gross margin guidance or commentary for 1Q. Maybe if you could unpack that a little bit in terms of just like the moving parts there, because I would have thought that I guess maybe it could have been a little bit better than that given material solution should be a higher percentage of the total company revenue. And I believe that has a higher kind of in corporate average gross margin. If you could just help us out there.
spk09: Yeah, Joe, I'll take that as a staff. So in the fourth quarter, we talked about a little favorable, impact favorable on the NICs for the quarter. That's why we're above the high of the guidance range. And then the Q1 commentary, a billion dollars, most of the impact on the market is really volume-driven with a slight NICs differential there as well. You're absolutely right. On the MSD side, those margins are a little bit higher than our corporate average. But fundamentally, that $1 billion commentary has quite a bit of revenue in the photonic solutions division as well as with the vacuum solution division as well. So really, the Q1 commentary is primarily volume-driven, a little bit more normalized mix.
spk06: Got it. And then just is there any sort of like cash outlay related to the ransomware attack that we should be aware of, I guess, when you think about that kind of back to your estimating the net leverage?
spk09: Yeah, Joe, I appreciate the question, but we're really not going to provide any details on the ransomware investigation. Certainly, we are hiring experts to help us recover, and those are expenses. But in terms of cash outlay, I think there's really no comment here.
spk06: Fair enough. All right, thank you.
spk02: Thank you. Again, one moment, please, for our next question. Our next question will come from Mark Miller of the Benchmark Company. Your line is open.
spk04: Thank you for the question. I just was wondering, between the ransomware issue and also the expected macro slowdown. Can you discuss what happened with the backlog last quarter? Does the backlog indicate it's going to be a front-end, back-end, or basically an even year in terms of sales?
spk09: Yeah, Marcus, John, I would say that, as I said earlier, the guidance we would have given prior to the ransomware of $1 billion, a lot of that is on the strength of the backlog that we have. entering Q1. And so, you know, we can't really predict what will happen after that for sure, but certainly the strength of the backlog allows us to probably – we probably would have outperformed many of our peers in Q1 if the ransomware event hadn't happened.
spk04: And the margin profile, what's in the backlog, is that similar to what you've been seeing recently?
spk09: Yeah, I think there's no change there, Mark. Same kind of customers, so no real change there on the margin profile, Mark.
spk02: Thank you. Thank you. One moment, please, for our next question. One moment. Our next question will come from Steve Barger of KeyBank Capital Markets. Your line is open.
spk08: Thanks. Good morning. You mentioned the 4Q geode order and I think a separate multi-unit order. Can you talk about pipeline visibility into further orders from legacy ATC customers?
spk09: Yes, Steve. I would say we talked about the 4Q order. That was a multi-unit order. That was not without its extra synergy, if you will. There was another order, which we did call out in Q1. which was a long-time Adatech customer that we really didn't have a relationship with. So that was clearly a synergy. That happened a lot sooner than I was expecting, Steve, so I'll take it for sure. But we have a long pipeline that's reviewed with me every month of other potential synergy opportunities going both ways, areas where ESB could help Adatech and vice versa. And these are, you know, you've got to look at these as multi-year efforts. You know, you talk to the customer, you get qualified, then they ramp. And, you know, that's the kind of timeframe that, you know, you should think about. And, you know, every once in a while you get an Uber like we talked about in the call.
spk08: Got it. And can you talk about how ATC's recurring revenue stream performed during the quarter versus your model? And is that revenue stream running as expected to start the year?
spk09: Yes, it is. As Seth talked about, excluding FX and Palladium like everybody else in the industry, we were really pleased with how they did relative to the industry. We believe we maintain share in electronics and GMF, and so that's really met our expectations, and we're really pleased with how Adatech is performing. Thanks.
spk02: Thank you. And that will conclude the Q&A portion of the conference. I would now like to turn the conference back to David Rizek for closing remarks.
spk10: All right. Thank you for joining us today and for your interest in MKS. Operator, you may close the call, please.
spk02: Thank you. This will conclude today's conference call. Thank you all for participating. You may now disconnect and have a pleasant day.
spk09: The conference will begin shortly. To raise and lower your hand during...
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