MKS Instruments (NASDAQ:MKSI), a global provider of technologies that enable advanced processes and improve productivity, announced their financial results for the third quarter of 2023, showing strong performance with revenue of $932 million and adjusted EBITDA of $235 million. However, the company expects a decline in revenue for the fourth quarter due to weak industry memory spending and a sequential decrease in the Electronics & Packaging (NYSE:PKG) market.
Key takeaways from the call:
- MKS Instruments posted Q3 revenue of $932 million, adjusted EBITDA of $235 million, and net earnings per diluted share of $1.46.
- Revenue from the semiconductor market was in line with expectations, while the Electronics & Packaging market revenue grew slightly. The Specialty Industrial market revenue was slightly below expectations.
- The company expects Q4 revenue to decline due to weak industry memory spending and a sequential decrease in the Electronics & Packaging market.
- MKS Instruments is focused on tight cost management and financial stewardship. The company has a strong balance sheet and liquidity position, with over $1.3 billion in liquidity and a net leverage ratio of 4.6 times.
- MKS made a voluntary debt prepayment of $100 million and completed a repricing of their term loan to reduce interest expenses.
- For Q4, the company expects revenue of $840 million, with a gross margin of 45.5% and adjusted EBITDA of $185 million. They anticipate a net earnings per diluted share of $0.85.
- The company remains confident in the long-term growth opportunities in their portfolio.
The company also reported $100 million in revenue for October and highlighted their efforts to achieve cost synergies of $45 million to $55 million. They expressed confidence in the consistency of the lithography, metrology, and inspection part of the semiconductor business and acknowledged that the industrial segment is less cyclical than the semiconductor capital expenditure world.
When asked about the revenue trajectory for each segment in 2024, the company stated that the specialty industrial segment has held up well, while the electronics and packaging segment has seen some cyclicality. They emphasized that the recovery in the semiconductor and electronics and packaging segments may go hand in hand.
Regarding deleveraging, MKS Instruments (NASDAQ:MKSI) mentioned that they will focus on revenue profitability, working capital efficiency, and management, as well as seizing opportunities in certain areas. The company's strong liquidity position, including $860 million in cash and short-term investments and a $500 million undrawn revolving credit facility, supports this strategy.
InvestingPro Insights
According to InvestingPro's real-time data, MKS Instruments has a market cap of 4420M USD, a P/E ratio of -2.45, and revenue of 3816M USD as of Q3 2023. This data is particularly relevant in light of the company's recent earnings call and Q4 outlook.
InvestingPro Tips suggest that while MKS Instruments' stock is currently in oversold territory and has been quite volatile, the company has maintained dividend payments for 13 consecutive years. This could be seen as a sign of financial stability, despite the expected drop in net income this year. Furthermore, the company's liquid assets exceed its short term obligations, offering some reassurance to potential investors.
In addition to these insights, InvestingPro provides numerous other tips and data points that can help investors make informed decisions. For instance, there are 9 more tips related to MKS Instruments available on InvestingPro's platform. These tips, combined with real-time metrics, can provide valuable insights into the company's financial health and market position.
Full transcript - MKSI Q3 2023:
Operator: Good day and thank you for standing by. Welcome to the MKS Instruments' Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today. David Ryzhik.
David Ryzhik: Good morning, everyone. I am David Ryzhik, Vice President of Investor Relations. And I'm joined this morning by John Lee, President and Chief Executive Officer; and Seth Bagshaw, Executive Vice President and Chief Financial Officer. Yesterday after market close, we released our financial results for the third quarter of 2023, 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 Annual Report on Form 10-K for the year-ended December 31, 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 MKS and Atotech Ltd, which MKS 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 our investor website for information regarding our combined company results, non-GAAP financial results and a reconciliation of our GAAP and non-GAAP financial measures. For a detailed breakout of reported and combined company revenues by end market and division, please visit our investor website. Now, I'll turn the call over to John.
John Lee: Thanks, David. Good morning everyone, and thank you for joining us today. Before I discuss our third quarter results and key business trends, I'd like to touch on the devastating violence that has occurred in the Middle East over the past month. There's simply no words that can describe the events that have unfolded, and our primary concern is the health and safety of our employees and their families in the region. As some of you may know, MKS has three facilities in Israel that manufacture some of our controls, optics and photonics solutions, which all remain operational. The dedication and resilience of our Israeli team is unmatched, and we hope for a return to peace quickly. Turning to our third quarter results, MKS delivered strong profitability despite continued softness in end market demand. We reported revenue of $932 million, adjusted EBITDA of $235 million, and net earnings per diluted share of $1.46. Revenue from our semiconductor market was in line with our expectations as the cyclical downturn in industry memory spending continued. As expected, demand for our critical vacuum subsystems for deposition and etch remained muted. However, demand for our photonic solutions for lithography, metrology and inspection continues to be resilient. Looking to the fourth quarter, we expect revenue from our semiconductor market to decline sequentially due to the continued weakness in industry memory spending, particularly for null , which is at a historically low level, and where leading edge tools contain relatively more MKS content. We also expect continued inventory workdowns at key customers as they adjust for current demand. The semi market will have its cycles, but the secular growth drivers over the long term are quite clear. The connected world will need more semiconductors with enhanced capabilities, creating the need for miniaturization and increased complexity. MKS is actively engaged with customers across a broad range of technology inflections. Examples include next-generation power solutions for advanced etch applications, optical subsystems for lithography, metrology and inspection, and precision motion for advanced bonding processes that enable applications such as high bandwidth memory. We pride ourselves on investing during a downturn to position us to be even stronger in the next upturn. That is the exact playbook we have deployed over the past 60 plus years, enabling us to become a foundational supplier to the semiconductor industry with number one or number two segment share across more categories of critical subsystems than anyone else in the industry. Turning to our Electronics & Packaging market, revenue grew sequentially and slightly better than expected due to normal seasonality associated with the consumer electronics market, as well as slightly higher PCB and Packaged Substrate production ahead of the Golden Week holidays in Asia in the beginning of the fourth quarter. I'm pleased to announce that we also shipped a number of HDI laser systems to the low-earth orbit, or LEO satellite communications space. We are the process tool record from multiple customers serving the LEO space due to the unique capabilities of our proprietary HDI via drilling technology, which enables increased productivity for one of the industry's fast emerging applications. This is a validation of our technology leadership and our unique ability to solve the hardest problems, establishing us as a key supplier to the leading PCB manufacturers. In addition, we also deliver our proprietary chemistry and playing [ph] equipment to this market, which highlights opportunities for an integrated approach. Looking to the fourth quarter, we expect revenue from our Electronics & Packaging market to be down sequentially, primarily due to seasonally softer chemistry utilization as well as the lumpy nature of our equipment sales. We are seeing some signs of stabilization in the PC and smartphone markets. Within the server market, there is continued strength in the Package Substrate market for AI applications, but this is more than offset by broader softness in non-AI server applications. Turning to our Specialty Industrial market, revenue was slightly below our expectations. Overall, the business was stable across our markets, but we saw some modest weakness in solar and LED applications. We leveraged our expertise in R&D investments in our Semiconductor and Electronics & Packaging markets to drive opportunities in our Specialty Industrial market. One example is the investment we have made in laser technology for advanced micromachining applications, where we see portability into Specialty Industrial applications such as solar and life and health sciences. Looking to the fourth quarter, we expect revenue from our Specialty Industrial market to be slightly down compared to third quarter levels, while demand across our end markets remains cyclically muted. We are highly engaged with customers and believe we are well positioned for the upturn. I'm proud of how our team continues to execute and deliver timely solutions for our customers while pursuing operational efficiency through tight management of discretionary costs. We have a long history of prudent, cost control and financial stewardship of our business throughout various market conditions, and today is no exception. Many of you on the call are familiar with the multi-decade secular growth story of the semiconductor market. We have been and will continue to be foundational to that market. However, electronic devices of today and the future will need more than just semiconductor transistor scaling. As we move into an era of multi-chip packaging or systems scaling. MKS is uniquely positioned to enable this new era of scaling with the broadest portfolio of critical technologies across equipment, chemistry and services. And now I'd like to turn the call over to Seth.
Seth Bagshaw: Thank you, John. Before I cover our third quarter results provide details our outlook for the fourth quarter. I want to echo John's comments regarding our concern for the health and welfare of our employees in Israel. We are amazed at the dedication and fortitude of our Israeli team as they operate in extremely difficult circumstances. This is a point of reference. Revenue from our manufacturing operations in Israel the last 12 months represented approximately 7% of our total revenue. Turning to our third quarter results. We delivered a revenue of $932 million just above the midpoint of our guidance. As expected, we recovered substantially all the remaining revenue impacted by the ransomware incident in the first quarter, which estimated approximately $30 million. After excluding the impact of ransomware incident recovery from the second and third quarters, our revenue grew slightly on a sequential basis. Turning to our semiconductor market. Revenue was $367 million in third quarter. After seeing the impact of ransomware incident recovery from the second and third quarters, our semiconductor revenue was relatively flat on a sequential basis. Revenue for Electronics & Packaging market was $243 million, an increase of 8% sequentially. Excluding the impact of foreign exchange palladium pass-through third quarter revenue declined 9% on a year-over-year basis with Q3 2022 representing combined company results. Moving to our Specialty Industrial market. Revenue in the third quarter was $322 million declining 5% sequentially. However, after excluding the impact of ransomware incident in the second and third quarters, our Specialty Industrial revenue was relatively stable on a sequential basis. Within our Specialty Industrial market, sales of our general metal finishing solutions to the automotive industry were flat on a sequential basis. On a year-over-year basis Specialty Industrial revenue was relatively flat excluding the impact of the ransomware incident, foreign exchange and palladium pass-through with Q3 2022 representing combined company results. In the third quarter, overall consumables and services revenue was also consistent on a year-over-year combined company basis, excluding the impact of foreign exchange and palladium pass-through and comprised 42% of our total revenue. We expect consumables and services revenue to remain a resilient source of revenue and profitability going forward. Turning to our margins. Third quarter gross margin was 47.1%, a sequential increase of 20 basis points exceeding the high end [ph] of our guidance. Efficient factory utilization, disciplined cost management and favorable product mix contribute to this outperformance. Third quarter operating expenses were $236 million sequential decrease of $7 million and below low-end of our guidance reflecting continued disciplined cost management. Third quarter operating margin was 21.8% and adjusted EBITDA margin was 25.2%, both exceeding our expectations reflecting the strength in our operating model. Our integration of Atotech continues to progress very well. Remain on track to achieve our cost synergy target of $55 million within 18 months to 36 months post close. We exited the third quarter achieving annualized synergies of nearly $45 million. Net interest expense for the third quarter was $84 million, relative in line with our expectations. Our tax rate for the third quarter was 14%, favorable to our expectations and reflective of the success of certain tax planning initiatives following the closing of the Atotech acquisition. As a result of these efforts, we now expect full year 2023 tax rate to be 19%. Looking beyond the fourth quarter, we believe the low 20% tax rate is the right way to think about it at this time, we expect to provide a more formal update to our long term tax rate in our fourth quarter earnings call. Net earnings for the third quarter with $98 million or $1.46 per diluted share. Turning to the balance sheet and cash flow. We exited the third quarter with more than $1.3 billion of liquidity, including cash to short term investments of $860 million in an undrawn revolving credit facility of $500 million. The cash position represents the increase with $758 million at the end of the second quarter. Free cash flow in the quarter were $142 million primarily results of strong cost control and sequential improvement in working capital. We exited the third quarter with gross debt of $5 billion. In October, we had a voluntary debt prepayment of $100 million, which is consistent with our strategy of deleveraging our balance sheet. Also in the current quarter, we successfully completed a repricing by $3.6 billion secured tranche B term loan. The repricing reduced the spread on our term loan from SOFR plus 275 basis points to SOFR plus 250 basis points, and also eliminated the credit spread adjustment respect to our term loan, which was 10 basis points at the time of the repricing. This repricing, completed despite challenging market conditions, is consistent with our long term practice of proactively managing our leverage and demonstrates the confidence lenders have in our operating model. At current rates, we estimate the combination of the repricing and prepayment will reduce our annualized interest expense by approximately $19 million. Our net leverage ratio exiting the third quarter was 4.6 times based on a trailing 12 month adjusted EBITDA. Our net leverage, as defined in our credit agreement, includes several other adjustments and was 4.2 times exiting the third quarter. Consistent with the prior quarter, we made a dividend payment of $15 million, $0.22 per share. I'll now turn to our fourth quarter outlook. We expect fourth quarter revenue $840 million plus or minus $40 million by end market outlook is as follows. Revenue from a semiconductor market of $320 million plus or minus $15 million. Revenue from Electronics & Packaging market of $205 million plus or minus $10 million. And revenue from a Specially Industrial market of $315 million plus or minus $15 million. Based on the midpoint of our guidance, we now expect revenue in the second half of 2023 to be slightly lower than the first half, compared to our prior expectation that it would be slightly higher than the first half. This is primarily due to our expectation of short term customer inventory workdowns in our semiconductor market. Based on anticipated product mix and revenue levels, we estimate fourth quarter gross margin of 45.5% plus or minus one percentage point. We expect operating expenses of $235 million plus or minus $5 million, relatively consistent with third quarter levels. For the fourth quarter, we estimate adjusted EBITDA of $185 million plus or minus $20 million. For the fourth quarter net interest expense, expect to be $80 million, reflecting current interest rates, as well as our recent successful tranche B term loan repricing and voluntary debt prepayment. Our tax rate expect to be 16% for the fourth quarter, consistent with the updated full year 2023 tax rate outlook of 19% that I mentioned earlier. Given these assumptions, we expect fourth quarter net earnings at $0.85 per diluted share plus or minus $0.27. In closing, we executed very well in maintaining profitability and generating solid cash flow despite cyclical softness in our end markets. These are things we can't control. We remain confident in long-term secular growth opportunities across our portfolio. When the market does bounce back, we are well positioned to emerge from the current environment even stronger than we were going in. With that, I'll turn it back to the operator for Q&A.
Operator: Thank you. [Operator Instructions] The first question comes from Krish Sankar at TD Cowen. Krish, your line is live.
Krish Sankar: Yes, hi. Thanks for taking my question. I had two of them. John, on the first one. I understand your semi revenues are worse than WFE, which happens during a cyclical downturn. It also probably looks like a tad [ph] lower than some of your peers. So I’m curious is that purely because your debt as exposure, or is there something else going on the market share front? And then I had a follow up.
John Lee: Yes, Krish, thanks for the question. I think it’s a pretty simple. We are an enabler for vertical NAND. I think we’ve talked about that in the past. And as I think we’ve heard and you’ve heard from many of our customers, NAND is one of the WFE segments that’s really particularly down. And so our exposure there, and therefore our enablement there is really, what’s causing us to be slightly worse than maybe some of our peers. As I want to remind everybody, we love being an enabler for VNAND in the industry with our RF power solutions. And of course, I don’t think anybody would say VNAND won’t come back. It’s certainly in a cyclical downturn. But when it comes back, we’ll be enjoying that market leadership again.
Krish Sankar: Got it. Thanks. And then I just wanted to follow up on some of the advanced packaging, I mean you highlighted Atotech exposure there, but it looks like Atotech as a percentage of revenue has really kind of been in this low 30% range for the last couple of quarters. Are you not seeing any of the benefits from advanced packaging? Or is it too early for that?
John Lee: Yes, I think it’s early days Krish, I think one of the things we talk about is packaged substrates. This is the advanced packaging that we’ve talked about. Lots of interest, lots of acceleration there, especially in high performance computing. And so we’re seeing a lot of that interest. But that’s still a relatively small percentage. But we expect that to grow as a percentage of advanced packaging and packaging overall.
Krish Sankar: Got it. Thanks, John.
John Lee: Thanks, Krish.
Operator: [Operator Instructions] Next question comes from Joe Quatrochi at Wells Fargo. Joe, your line is open.
Joe Quatrochi: Yes, thanks for taking the questions. It looks like your chemicals revenue was up nicely sequentially in the quarter. Wondering if, how much of that just normal seasonality or maybe some pass through the palladium costs?.
John Lee: Yes, Joe, certainly part of it was seasonality, but it was a little better than we expected, even taking into account seasonality. Now, as we said in our prepared remarks, there was a little bit of pull in, because of the holiday week in the first quarter Q4, but it was just a little better. And so we’re happy to see that.
Joe Quatrochi: Got it. And then maybe on the semi side, one of your peers had talked about preparing for a kind of flattish 2024 and talking to their customers, I guess curious how you’re thinking about that. And maybe in the context you did talk about null being definitely weaker, how you’re thinking about the set up into next year.
John Lee: Yes, obviously we read the same things you guys do and the visibility is poor for the industry right now. I think what we’re preparing for is to continue supporting our customers in R&D so that when it comes back, we will be enjoying an even stronger position and in the meantime we’re watching costs very closely as you can see from our numbers. I think the industry is kind of looking at first half is relatively muted, kind of the same as kind of the second half of 2023, and then I think after that I think there’s varying opinions. So that’s what I would say is that we’re reading the same kind of things you are and it looks pretty flat for the next few quarters to us as well.
Joe Quatrochi: Thank you.
John Lee: Thanks Joe.
Operator: Please stand by for the next question. The next question comes from Steve Barger at Keybanc Capital Markets. Steve, your line is live.
Steve Barger: Thanks. John, I think we all understand this has been a really challenging cycle, but the stock is obviously acting like there are bigger risks and problems here. So can you just discuss again why you’re confident MKS is better with ATC in the portfolio and maybe further discuss just how you see this playing out in coming quarters and years?
John Lee: Yes. Steve, thanks for the question. So, we’ve talked about advanced packaging and we’ve talked about how critical that’s going to be to enable the next generation of electronics. So as I said in our prepared remarks, it’s no longer that just a semiconductor will enable advanced electronics. I think everybody’s talking about chiplet packaging or systems packaging if we are going to continue as an industry pushing the concept, the economic concept of Moore’s Law. So we love having Atotech as part of our portfolio. There’s no other company that has market leadership in packaging, chemistry and the equipment that’s Atotech as well as market leadership in the broad set of technologies in semiconductor critical subsystems, as we’ve talked about in the past, that enables dep and etch as well as lithography, metrology and inspection. So we firmly believe that the combination of both really sets up MKS uniquely for the future.
Steve Barger: And can you just talk about what the feedback has been from customers as you go out and maybe how you see the CapEx cycle next year and what you think that can translate into for MK?
John Lee: Well, customers are certainly very receptive to the concept of MKS bringing more solutions to them that include lasers as well as chemistry equipment and then other types of packaging solutions. In terms of CapEx, I think that’s similar to Joe’s question. It’s going to be something that seems a bit muted for packaging though. I think next year if things stabilize, the compares will be good, but your guess is as good as mine as to how much it comes back. But I would also comment that the packaging market for us is less cyclical. There are cycles for sure, but the amplitude is much less than semi CapEx as you’ve seen in our numbers.
Steve Barger: Got it. And Seth, can I squeeze in a quick one? Sorry if I missed it. Did you talk about free cash flow in 4Q, and can we expect incremental debt pay down in the remainder of this year?
Seth Bagshaw: Yes, we didn’t disclose or give guidance on free cash flow in Q4. You saw Q3 was quite strong. By the way, Steve, is it certainly that’s our goal going forward to drive that free cash flow up. So it’ll depend on working capital needs. But so we didn’t really give that type of guidance in the fourth quarter. In terms of debt pay down, we have done a lot of pulling of levers, as you saw in prepared remarks. We did $100 million in October, and our players do lever aggressively going forward now, and roll out as the year progresses. Did the repricing that took $11 million off the table. So that’s, again a level we pulled with Atotech we’ve driven the tax rate down long term as well. That’s a big value driver. And then the cost synergies is $45 million to $55 million one year in. So things we can control as in prepared remarks. We’ve actually done a lot already in a short period of time. There’s more opportunity going forward as well. And that’ll roll out, there’s no change in our philosophy to delever drive free cash flow, drive the integration activities, which gone very well.
Steve Barger: Appreciate the time. Thanks.
Seth Bagshaw: Yep. Thanks, Steve.
Operator: One moment for our next question. And the next question comes from James Ricchiuti at Needham & Company. Your line is open.
James Ricchiuti: Thank you. I wanted to focus on the photonics solutions portion of the semi business, which appears to be holding up better. And, John, maybe you could talk to what your visibility, your line of sight in that area of the business? Are you any more optimistic that that portion of the business is able to hold up in this cyclical downturn?
John Lee: Yes, Jim, I think we do believe that there is less cyclicality in the lithography, metrology inspection part of the semi business, and we’ve seen that play out over multiple quarters. We’re in constant contact with those key customers, and you can see what they say publicly about their revenue over the next several quarters as well. So, we believe that’s really just an area of semi that’s just much more consistent than certainly the dep etch part. So that’s our visibility right now, and that’s our belief that it will continue.
James Ricchiuti: And on the Specialty Industrial, obviously, it’s a newer area for you. And are you more concerned now about the overall macro environment potentially impacting that portion of the business as we enter 2024? In other words, are you any more concerned about the near term outlook in that area of the business?
John Lee: Yes, Jim, I mean, what we’ve seen in the past is that the industrial part has been pretty steady, our revenue in it, but we’re always watching some of the key markets, such as automotive, and that’s why we made the comment about automotive in our prepared remarks. But as I said in the past, two industrials are certainly less cyclical than the semi CapEx world. Also comment that much of our industrial revenue is utilization dependent chemistry. So that adds a little more stability to it. But to your point, Jim, we’re always watching the macro environment to see how that may or may not affect our industrial business.
James Ricchiuti: I’ll just lob one more in. I was just wondering, on geo, you seem to be getting some traction. How should we be thinking about the potential for that to be a bigger contributor in the near term?
John Lee: Yes, I think what we talked about at this call was this low-earth orbit application, the PCBs that are needed to support that both on the satellites as well as the ground stations. And that had a technology requirement that our tool was uniquely positioned to deliver on that. So that’s just another proof point of the technology that we’ve developed. I think that we continue to make progress in other areas as well. And so we just wanted to point out that we continue to get signs that what we’ve developed and the technology there is really unique.
James Ricchiuti: Thank you.
John Lee: Thanks, Jim.
Operator: One moment for our next question. The next question comes from Sidney Ho at Deutsche Bank. Your line is open.
Sidney Ho: Great, thank you. Good morning. I’m not trying to ask for specific guidance for next year. How are you thinking about the revenue trajectory for each segment in 2024? Do you think there will be another step down in the first half in any of the segments, whether it’s cyclically or seasonally? It sounds like you think semis will be flattish for a few quarters, but how about the other segments and what kind of visibility do you have right now? Any color by segment or even by end market will be great.
John Lee: Yes. Thanks, Sidney. Yes, I think we talked about semi and we’re kind of bouncing on the bottom, as we said. I would say Specialty Industrial has just held up and been very steady for this whole duration of the semi downturn. So that’s kind of the expectation. Electronics & Packaging did see some cyclicality, as you’ve seen in the quarter. There is some seasonality to it as well, but certainly less cyclical in terms of amplitude than the semi business. And it’s much more utilization dependent. So I think that we watch the macro demands for PCs and servers and all that, and that drives some of that Electronics & Packaging business. So, I think the semi recovery and the Electronics & Packaging recovery may go hand in hand, but the amplitudes of those are much different, very different between the two markets.
Sidney Ho: Okay, that’s fair. Now, my second question is you guys have a good track record of deleveraging [indiscernible] acquisition. Given the sluggish demand, what is a realistic gross leverage ratio we should be expecting by the end of calendar 2024, and how should we think about the levers other than waiting for the business to recover? Thank you.
Seth Bagshaw: Yes, thanks. And so we kind of asked for guidance looking out in 2024. So probably can’t give you that type of details. But obviously the Q3 kind of gives you a snapshot at certain those revenue levels, what type of cash flow comes off the business. So you got to have that view in mind. As John mentioned, we think semi is kind of at the trough levels or at least low levels for sure, historically speaking, certainly in the NAND environment. So we think that’ll over know be an opportunity for us. But I would say fundamentally it’ll be revenue driven. We will work hard on working capital efficiency. We think we have more opportunity in certain areas that we’re working on pretty hard right now. But I would say it’s really revenue profitability driven and then working capital management. And you saw in the Q3 results we work very hard to deliver really quite strong results given the environment. So, I think those are things I would focus on, the things we’re kind of working pretty hard and that’s been our playbook historically speaking.
Sidney Ho: Okay, thank you.
Seth Bagshaw: Yep. Thanks, Sidney.
Operator: I am showing no further questions at this time. So this concludes the question-and-answer session. I would now like to turn it back to David Ryzhik with closing remarks.
David Ryzhik: Thank you for joining us today and for your interest in MKS. Operator, you may close the call, please.
Operator: Thank you for your participation in today’s conference. This does conclude the program and you may now disconnect.
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