MKS Inc.

Good day, and thank you for standing by. Welcome to the MKS Third Quarter 2025 Earnings Conference. This time, all participants are in a listen-only mode. After the speaker's presentation, question and answer session. To ask a question during the session, you'll need to press star one one on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Paritosh Misra. Please go ahead.

Good morning, everyone. I'm Parathosh Mitra, Vice President of Investor Relations, and I'm joined this morning by John Lee, President and Chief Executive Officer, and Ram Vempura, Executive Vice President and Chief Financial Officer. Yesterday, after market close, we released our financial results for the third quarter of 2025, which are posted to our investor website at investor.nks.com. As a reminder, various remarks about future expectations Plans and prospects for MTS comprise forward-looking statements. Actual results may differ materially as a result of various important factors, including those discussed in yesterday's press release, our most recent annual report on Form 10-K, and any subsequent quarterly reports on Form 10-Q. 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 non-GAAP financial measures. Unless otherwise noted, all income statement related financial measures will be non-GAAP, other than revenue and gross margin. Please refer to our press release and the presentation materials posted to the investor relations section of our website for information regarding our non-GAAP financial results and the reconciliation to our GAAP measures. Our investor website also provides the detailed breakout of revenues by end market and division. Now, I'll turn the call over to John.

Thanks, Paritosh, and good morning, everyone. MCAS delivered a solid third quarter with revenue and EPS in the upper half of our guided ranges and healthy results across each of our three end markets. Third quarter revenue of $988 million was up 10% year over year, driven by strong demand in our semiconductor and electronics and packaging end markets. We continue to demonstrate strong execution in delivering value to our customers' most critical needs. Net earnings per diluted share total $1.93. We also continue to take advantage of our improved cash flow to reduce our leverage with another voluntary prepayment of $100 million on our term loan completed in October. MKS is uniquely positioned at the forefront of accelerating innovation and enabling the advanced technologies that power the AI era. Increasing device complexity is creating significant challenges and opportunities in both the semiconductor and advanced packaging markets. We are differentiated in our ability to serve many critical applications with our comprehensive portfolio of semiconductor capital equipment subsystems, advanced packaging chemistries, and advanced packaging equipment systems. Our T3 performance in our end market demonstrates how we are benefiting in this dynamic environment. Starting with our semiconductor market, we reported solid revenue growth year over year, driven by continued strength in our products supporting deposition, and etching applications, which are increasingly critical for advanced memory and logic manufacturing. Our dissolved gas systems for advanced logic applications were also a solid contributor to our performance, and our services business continues to contribute steady year-over-year growth. Lower NAND upgrade activity, which was expected after a very strong second quarter, drove the sequential decline in semiconductor sales. However, our leadership and power delivery remains as strong as ever. in this space. We expect four-quarter semiconductor revenue to remain flat on a sequential basis, which would translate into a healthy double-digit year-over-year growth for 2025. This underscores how well positioned we are with the broadest portfolio of products and technologies to drive our industry's increasingly challenging technology roadmaps. In electronics and packaging, revenue exceeded the midpoint of our expectations, growing 25% year-over-year. This strong performance reflects continued momentum across our portfolio, driven by robust demand for our chemistry solutions, and in particular, our chemistry equipment. Investments we have made over the past several years to position MKS to optimize the interconnect in advanced electronics are now paying off as we gain momentum in AI-related applications. Today, our chemistry revenue growth reflects our position as a leader of the most advanced packaged used in high performance computing applications. Longer term, our chemistry equipment business highlights how critical we are to our customers as they rapidly build their next generation infrastructure. The high attach rates from our equipment sales are a leading indicator of sustainable longer term revenue from our proprietary chemistries. It's important to keep in mind that once we build and install the equipment, it can take six to 12 months for customers to qualify it and then put it into production. Once in production, chemistry provides a long tail, steady, consumable revenue, generally for the life of that equipment. With high single digit growth in chemistry revenues and strong equipment sales through Q3, we have confidence our proprietary chemistry will be a key revenue generator for us in the years ahead. In Q4, we expect revenue from our electronics and packaging market to be up on a sequential basis and up double digits on a year over year basis. Our strong performance reflects our ability to capture emerging AI-driven demand, even as broader industry demand trends remain stable in markets such as smartphones and PCs. We anticipate continued strength in our chemistry equipment business, supported by AI, offset by modest sequential declines in chemistry due to seasonal factors consistent with prior years. Assuming the midpoint of our Q4 guidance, our electronics and packaging business is on track deliver robust full-year growth of approximately 20%. Our specialty industrial market revenue was consistent with the stable trends we've seen over the past several quarters. Within this market, the industrial category showed sequential improvement in life and health sciences and research and defense end markets remained steady. We had a healthy quarter of design wins, particularly in research and defense. This success highlights how MCAS leverages its semi and electronics R&D investments to unlock new opportunities in specialty industrial markets that generate attractive incremental margins and cash flow. Looking ahead to Q4, we expect specialty industrial revenue to remain relatively flat sequentially. Overall, MCAS is continuing to perform at a high level in 2025, with year-over-year growth powered by our semiconductor and electronics and packaging markets. Our broad portfolio of differentiated products and technologies in areas such as vacuum, power, photonics, laser drilling, and advanced chemistries positions us favorably to win new opportunities in applications critical to enabling the AI transformation. Against this exciting backdrop, we are executing with financial discipline, aligning our business to win in our key markets, and reducing our leverage. I'll close by extending my thanks to our MKS team their tireless work thriving the great results we are reporting today and also to our customers and our suppliers across the globe for their collaboration and support with that let me turn it over to ram to run through the financial results and fourth quarter guidance in more detail from thank you john and good morning everyone we delivered strong results in the third quarter driven by healthy demand in our semiconductor and electronics and packaging and markets and continued stability in our specialty industrial and market