MKS Instruments(US:MKSI)2024-05-09 20:46Financial Performance - For the three months ended March 31, 2024, total net revenues were $868 million, a decrease of $25 million or 3% compared to the prior quarter, but an increase of $74 million or 9% compared to the same period last year [116]. - Semiconductor market revenues were $351 million, down $11 million or 3% from the prior quarter, but up $42 million or 14% year-over-year due to prior year order fulfillment issues related to a ransomware event [119]. - Electronics and packaging market revenues decreased by $18 million or 8% from the prior quarter and by $14 million or 6% year-over-year, primarily due to softness in the consumer electronics market [121]. - Specialty industrial market revenues increased by $4 million or 1% from the prior quarter and by $46 million or 17% year-over-year, mainly due to lower revenue in the prior year period from the ransomware event [126]. - Total net revenues for the three months ended March 31, 2024, were $868 million, a decrease from $893 million in the prior quarter but an increase from $794 million in the same period last year [134]. Profitability Metrics - Gross profit margin improved to 47.8% for the three months ended March 31, 2024, compared to 46.0% in the prior quarter and 42.2% in the same period last year [130]. - Net income for the three months ended March 31, 2024, was 1.7%, a recovery from a net loss of 7.6% in the prior quarter [130]. - The cost of revenues decreased to 52.2% of total net revenues for the three months ended March 31, 2024, down from 54.0% in the prior quarter [130]. - Gross margin as a percentage of net revenues increased to 47.8% for the three months ended March 31, 2024, compared to 46.0% in the prior quarter and 42.2% in the same period last year [137]. Research and Development - Research and development expenses increased to 8.1% of total net revenues for the three months ended March 31, 2024, compared to 7.8% in the prior quarter [130]. - Research and development expenses for the three months ended March 31, 2024, were $70 million, flat compared to the prior quarter and a decrease of $2 million from the same period last year [143]. - The company continues to focus on developing new products to meet evolving customer needs, particularly in semiconductor and electronics markets [145]. - The company expects to continue significant investment in research and development to support market expansion and product advancements [146]. Cash Flow and Investments - Net cash provided by operating activities was $67 million for the three months ended March 31, 2024, resulting from a net income of $15 million [163]. - Net cash used in investing activities was $18 million for the three months ended March 31, 2024, all attributed to capital expenditures [164]. - Net cash used in financing activities was $72 million for the three months ended March 31, 2024, primarily due to net proceeds from Incremental Tranche B Loans [165]. - Cash and cash equivalents and short-term investments totaled $846 million as of March 31, 2024, down from $875 million at the end of 2023 [162]. Debt and Financing - The company entered into a credit agreement providing for a senior secured term loan facility of $5.6 billion and a revolving credit facility of $500 million [167]. - As of March 31, 2024, the outstanding principal of the Term Loan Facility was $4.89 billion with a weighted average interest rate of 7.6% [189]. - The company has the ability to incur additional incremental debt facilities up to $1,011 million or 75% of consolidated EBITDA, plus voluntary prepayments and an unlimited amount subject to leverage ratio tests [182]. - The total net leverage ratio must not exceed 5.25 to 1.00 for fiscal quarters ending December 31, 2023, through September 30, 2024, with an annual step-down of 0.25:1.00 [183]. - As of March 31, 2024, there were no borrowings under the Revolving Facility, which has a maturity date in August 2027 [189]. - The company has lines of credit and financing facilities with Japanese subsidiaries providing for aggregate borrowings of up to $20 million as of March 31, 2024, with no borrowings under these arrangements [190]. - The Credit Agreement contains negative covenants restricting the ability to incur additional indebtedness, pay dividends, and engage in certain transactions [186]. Tax and Other Expenses - The effective tax rate for the three months ended March 31, 2024 was 23.1%, higher than the U.S. statutory tax rate, primarily due to foreign withholding taxes and U.S. base erosion tax [159]. - Interest expense for the three months ended March 31, 2024 was $81 million, compared to $82 million for the same period in 2023, indicating a slight decrease [156]. - Loss on extinguishment of debt for the three months ended March 31, 2024 was $9 million, up from $8 million in the previous quarter [157]. - Other (income) expense, net for the three months ended March 31, 2024 was a loss of $3 million, compared to a gain of $12 million in the previous quarter [158]. Market Risk and Compliance - The company is currently evaluating the impact of new accounting standards on its disclosures, including segment reporting and income tax disclosures [195][196]. - There were no material changes in the company's exposure to market risk from December 31, 2023, to March 31, 2024 [198]. - The company has used derivative instruments for risk management, including foreign exchange forward contracts and interest rate swaps [191]. - As of March 31, 2024, the company was in compliance with all covenants under the Credit Agreement [187].