MKS Instruments(MKSI) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for the period ended June 30, 2025 ITEM 1. FINANCIAL STATEMENTS (Unaudited) This section presents the unaudited condensed consolidated financial statements, highlighting key financial positions, operational results, equity changes, and cash flows for the period ended June 30, 2025 Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of June 30, 2025 Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $674 | $714 | | Inventories | $918 | $893 | | Goodwill | $2,570 | $2,479 | | Total assets | $8,826 | $8,590 | | Liabilities & Equity | | | | Total current liabilities | $832 | $775 | | Long-term debt, net | $4,357 | $4,488 | | Total liabilities | $6,273 | $6,268 | | Total stockholders' equity | $2,553 | $2,322 | - Total assets increased to $8.826 billion as of June 30, 2025, from $8.590 billion at the end of 2024, driven by increases in goodwill and property, plant, and equipment[7] - Total liabilities remained relatively stable at approximately $6.3 billion, while stockholders' equity increased from $2.322 billion to $2.553 billion, primarily due to retained earnings and changes in accumulated other comprehensive loss[7] Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) This section details the company's financial performance, including revenues, gross profit, and net income for the second quarter and year-to-date periods of 2025 Consolidated Statement of Operations Highlights (in millions, except per share data) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total net revenues | $973 | $887 | $1,910 | $1,755 | | Gross profit | $453 | $419 | $897 | $834 | | Income from operations | $135 | $127 | $246 | $233 | | Net income | $62 | $23 | $114 | $37 | | Diluted EPS | $0.92 | $0.33 | $1.69 | $0.55 | - Net revenues for Q2 2025 increased by 9.7% YoY to $973 million, and for the six months ended June 30, 2025, revenues grew by 8.8% YoY to $1.91 billion[9] - Net income for Q2 2025 more than doubled to $62 million compared to $23 million in Q2 2024, driven by higher revenues and lower interest and debt extinguishment expenses[9] Condensed Consolidated Statements of Stockholders' Equity This section outlines changes in the company's equity, including share repurchases and dividend payments, for the period ended June 30, 2025 - Total stockholders' equity increased from $2.322 billion at the end of 2024 to $2.553 billion at June 30, 2025[11] - During the first six months of 2025, the company repurchased 0.5 million shares for $45 million and paid cash dividends of $30 million ($0.44 per share)[11] Condensed Consolidated Statements of Cash Flows This section details the company's cash inflows and outflows from operating, investing, and financing activities for the first half of 2025 Consolidated Statement of Cash Flows Highlights (in millions) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $306 | $189 | | Net cash used in investing activities | ($45) | ($44) | | Net cash used in financing activities | ($309) | ($159) | | Decrease in cash and cash equivalents | ($40) | ($25) | - Cash from operations significantly increased to $306 million for the first half of 2025, up from $189 million in the prior-year period, primarily due to higher net income[14] - Financing activities used $309 million, mainly for debt repayments of $225 million, common stock repurchases of $45 million, and dividend payments of $30 million[14] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed disclosures on the company's segments, revenue by end market, and debt structure, supporting the financial statements - The company operates under three reportable segments: Vacuum Solutions Division (VSD), Photonics Solutions Division (PSD), and Materials Solutions Division (MSD)[17] Revenue by End Market (in millions) | End Market | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Semiconductor | $432 | $369 | $846 | $720 | | Electronics and Packaging | $266 | $229 | $519 | $437 | | Specialty Industrial | $275 | $289 | $545 | $598 | | Total net revenues | $973 | $887 | $1,910 | $1,755 | Debt Summary (in millions) | Debt Instrument | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Term Loan Facility, net | $2,981 | $3,114 | | Convertible Notes, net | $1,376 | $1,374 | | Total long-term debt, net | $4,357 | $4,488 | Revenue by Segment (in millions) | Segment | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | VSD | $407 | $335 | $793 | $668 | | PSD | $243 | $254 | $507 | $507 | | MSD | $323 | $298 | $610 | $580 | | Total | $973 | $887 | $1,910 | $1,755 | ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management discusses the company's financial performance, condition, and operational results, highlighting revenue drivers, expense trends, and liquidity for the period ended June 30, 2025 Overview and Markets This section provides an overview of the company's market focus and details revenue performance across its key end markets - The company delivers foundational technology solutions to the semiconductor manufacturing, electronics and packaging, and specialty industrial applications markets[117] Net Revenues by End Market (in millions) | End Market | Q2 2025 | Q1 2025 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Semiconductor | $432 | $413 | $846 | $720 | | Electronics and Packaging | $266 | $253 | $519 | $437 | | Specialty Industrial | $275 | $270 | $545 | $598 | | Total net revenues | $973 | $936 | $1,910 | $1,755 | - Semiconductor market revenue increased 5% sequentially in Q2 2025 due to strength in logic and foundry applications and upgrades for NAND memory production[127] - Electronics and Packaging market revenue grew 5% sequentially, driven by a seasonal rebound in chemistry sales after the Lunar New Year[131] - Specialty Industrial market revenue decreased 9% year-over-year for the six-month period, mainly due to lower chemistry sales in the automotive market and lower revenues in the general industrial market[138] Results of Operations This section analyzes key operational metrics including gross margin, research and development expenses, and interest expense for the reporting period - Total gross margin for Q2 2025 was 46.6%, a decrease of 0.8 percentage points from Q1 2025, primarily due to higher duty/tariff costs and unfavorable product mix[151][154] - Research and development expenses increased to $76 million in Q2 2025 from $70 million in Q1 2025, mainly due to higher compensation-related costs[157][158] - Selling, general and administrative expenses decreased by $10 million sequentially to $175 million in Q2 2025, primarily from lower stock compensation costs[162] - Interest expense, net, decreased by $54 million for the first six months of 2025 compared to the same period in 2024, due to debt refinancing at a lower interest rate and voluntary prepayments[169] - The effective tax rate for the six months ended June 30, 2025 was 13.0%, lower than the U.S. statutory rate due to deductions for foreign derived intangible income (FDII) and R&D credits[174] Liquidity and Capital Resources This section discusses the company's cash position, operating cash flow, debt management, and capital allocation strategies - The company held $674 million in cash and cash equivalents as of June 30, 2025, with $577 million held by foreign subsidiaries[179][180] - Net cash from operating activities was $306 million for the first six months of 2025, a significant increase from $189 million in the prior year period[182] - The company made voluntary debt prepayments of $100 million in January 2025 and $100 million in June 2025 on its USD Tranche B loan. An additional $100 million was prepaid on August 1, 2025[187][193] - In the first half of 2025, the company repurchased $45 million of its common stock and paid $30 million in dividends[183][185][186] - As of June 30, 2025, the principal outstanding on the Term Loan Facility was $3.1 billion with a weighted average interest rate of 5.9%. There were no borrowings under the $675 million Revolving Facility[190] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section confirms no material changes in the company's market risk exposure since December 31, 2024, referencing prior disclosures - As of June 30, 2025, there were no material changes in the company's exposure to market risk from the levels reported at December 31, 2024[215] ITEM 4. CONTROLS AND PROCEDURES Management confirms the effectiveness of disclosure controls and procedures as of June 30, 2025, with no material changes to internal control over financial reporting - Based on an evaluation as of June 30, 2025, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[216] - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls[217] PART II. OTHER INFORMATION This section includes disclosures on risk factors, other information, and a list of exhibits filed with the report ITEM 1A. RISK FACTORS This section incorporates by reference the company's risk factors from its Annual Report on Form 10-K and prior Quarterly Report on Form 10-Q - The company's risk factors are incorporated by reference from its Annual Report on Form 10-K for the year ended December 31, 2024, and its Quarterly Report on Form 10-Q for the period ended March 31, 2025[218] ITEM 5. OTHER INFORMATION This section confirms that no directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2025 - During the second quarter of 2025, none of the company's directors or officers adopted or terminated a trading arrangement under Rule 10b5-1(c) or a non-Rule 10b5-1 trading arrangement[219] ITEM 6. EXHIBITS This section lists all exhibits accompanying the Form 10-Q, including required certifications and XBRL data files - The report includes standard exhibits such as CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906, and Inline XBRL documents[221]