Overview of the Company’s Financial Performance

The company has reported its financial results for the first quarter of 2025. The company has three main divisions - the Vacuum Solutions Division (VSD), the Photonics Solutions Division (PSD), and the Materials Solutions Division (MSD). Overall, the company saw solid financial performance in the quarter, with net revenues increasing 8% year-over-year to $936 million.

The semiconductor market, which accounts for 44% of total net revenues, saw a 3% increase in net revenues compared to the prior quarter and an 18% increase compared to the same period last year. This was driven by strong demand for the company’s semiconductor capital equipment and services.

The electronics and packaging market, which makes up 27% of net revenues, saw a slight decrease of less than 1% compared to the prior quarter, but a 22% increase year-over-year. This was due to higher demand for PCB via drilling systems and an increase in chemistry and equipment sales.

The specialty industrial market, which is 29% of net revenues, decreased 4% compared to the prior quarter and 13% year-over-year. This was mainly due to lower chemistry sales in the automotive market and lower revenue across the material processing, spectroscopy, and general industrial markets.

Revenue and Profit Trends

Net product revenues decreased 1% compared to the prior quarter, but increased 9% year-over-year. The decrease from the prior quarter was due to lower chemistry sales in the electronics and packaging and specialty industrial markets, partially offset by increases in the semiconductor market. The year-over-year increase was driven by higher sales in the semiconductor and electronics and packaging markets, offset by decreases in the specialty industrial market.

Net service revenues increased 5% compared to the prior quarter and 3% year-over-year, primarily due to higher demand in the semiconductor market.

Gross profit as a percentage of net revenues was 47.4%, up slightly from 47.2% in the prior quarter. Gross profit percentage for products was 46.6%, up 0.4 percentage points from the prior quarter, while gross profit percentage for services was 52.9%, down 1.5 percentage points.

Research and development expenses increased $5 million compared to the prior quarter, mainly due to higher compensation-related costs. Selling, general and administrative expenses increased $9 million, primarily from higher compensation costs.

Operating income was $111 million, or 11.8% of net revenues, compared to $135 million, or 14.4%, in the prior quarter. The decrease was mainly due to higher restructuring and other charges.

Net income was $52 million, or 5.6% of net revenues, compared to $90 million, or 9.6%, in the prior quarter. The decrease was primarily driven by the higher operating expenses.

Analysis of Strengths and Weaknesses

Strengths:

• Broad and diversified product portfolio serving the semiconductor, electronics and packaging, and specialty industrial markets
• Strong market position, with the company characterizing itself as the “broadest critical subsystem provider” in the semiconductor wafer fabrication equipment ecosystem
• Solid financial performance, with 8% year-over-year revenue growth and healthy profitability
• Strong cash position, with $655 million in cash and cash equivalents

Weaknesses:

• Exposure to trade tensions and tariffs, which have impacted the company’s revenues and costs
• Reliance on international markets, with 81% of net revenues coming from outside the U.S.
• Fluctuations in demand in the semiconductor and electronics markets, which can be difficult to predict

Outlook and Future Prospects

The company remains cautiously optimistic about the future, though it acknowledges the potential for continued volatility in global trade policies and conditions. The company is actively implementing contingency plans, including alternative sourcing strategies and supplier diversification, to help mitigate potential future impacts from trade restrictions.

In the semiconductor market, the company expects continued strength in logic and foundry applications, as well as planned upgrades to support existing NAND memory production. However, the company notes that the semiconductor market is subject to rapid demand shifts that are difficult to predict.

In the electronics and packaging market, the company anticipates continued growth in PCB via drilling systems and electronics chemistries and equipment. But the company also faces headwinds from seasonality in the electronics market.

The specialty industrial market remains more mixed, with the company expecting continued challenges in the automotive and general industrial segments, offset by opportunities in life sciences, research, and defense applications.

Overall, the company believes its diversified portfolio, strong market positions, and proactive risk mitigation strategies position it well to navigate the current environment. However, the company acknowledges the potential for ongoing uncertainty and volatility, particularly around global trade policies.