MKS INC — Call Transcript 2025

Are we at time? Okay, I think we'll go ahead and get started. Good afternoon, everybody. Welcome to the session for MKS. I'm Rob Mason, the Senior Analyst at Baird that covers advanced industrial technology. Certainly want to welcome MKS to the Industrial Conference. As you may be aware, MKS is a leading technology solutions and subsystems provider into leading-edge semiconductor manufacturing, electronics, and packaging. Very pleased to have Ram Mayampurath, the Executive Vice President and CFO, with us, as well as Keith Loop, who's the Vice President of their Vacuum Systems and Services business. Ram's going to go through a few slides. There should be a little bit of time at the end for Q&A, and if you have any questions, direct those up to us via the iPad, and I'll work those in. Thank you, Rob. Hello, everybody. Let's just get right in. We have quite a few. MKS is a foundational leader in technology. We'll get into the details of that in a minute here, but we provide precision solutions to our customers. We are engaged in solving our customers' toughest problems, if you may. As the technology demand gets more complex, as the demand on equipment and technology increases, it's good for MKS as we get into product miniaturization and more technology requirements. It works to our advantage. We have a very strong, close relationship with our customers. We do co-development with them. The proximity to the customers and the technology discussions is a core strength for MKS. We are also very focused on driving value for our shareholders. Our execution remains very strong. We'll get into some of the numbers here in a minute. We are very focused on driving profitability and cash flow. These are 2024 numbers, and we'll take you through year to date 2025 as well. $3.6 billion, we spent about 8% on R&D. It's the technology differentiation that helps, that separates us from our competition and also gives us the price and the margin advantage that we have. We are about 25% EBITDA, and we'll get into some of the other numbers here in more detail in the slides ahead. The 85% of surround the chamber strategy and the 70% of the steps in the chemical business that we are in. We'll talk about that in a little detail in the slides ahead. If you look at our main market segments, these are our three main market segments: semiconductor, which includes semiconductor, traditional semiconductor that MKS has been involved in, and also world-class optics, which is the lithometrology and inspection. Electronics and packaging, that came out of the large acquisition we did about three years back of Atotech business. And specialty industrial, which is a collection of several markets, if you may, includes automotive. It includes general industrial. It includes aerospace and defense, life health sciences and research. By no way is it commodity business. It is very profitable, high-margin businesses. We will get into all of them in very much detail here in the slides ahead. Just to give you an overview, those are the key market segments we play in. To take you through the next couple of slides, Keith will take you through the technology part. All right, thank you, Ram. As Ram said, semiconductor is our core business, as you saw on the last slide. As you can see, the semiconductor business has a long history of steady growth over the last several decades, whether it's semiconductors for PCs or semiconductors for your mobile or handheld device. There's been strong, steady growth of chip sales over that period. Now as we look forward in the last few years, and as we look forward, there's still strong growth drivers in the semi business, really driven by AI, big data, or any other high-performance computing. There's a pretty broad consensus in the industry that the semiconductor industry is going to grow to about a trillion dollars in revenue by 2030. There are even some more recent reports of even numbers significantly higher than that by 2030. There is a lot of good, strong end demand growth for semiconductor chips. Walking the next layer back to kind of how that impacts MKS, to make all those chips, you need to build factories and fill those with equipment. There is a measure called wafer fab equipment spending, which is how much money is spent on equipment every year. You can see in the last five or six years, there has been a significant increase in equipment spending from about $30 billion five or six years ago to over $100 billion now in the last several years. As the chips have become more complex to make, the revenue that you saw there on the revenue side, it is the equipment intensity and the amount of money to spend to make that chip that has gone up as well. Again, more factories need to be built, more equipment needs to be purchased. If we hit the trillion dollars in revenue by 2030 on kind of a similar intensity assumption, that is going to mean that we need to increase WFE from a little over $100 billion today to well over $150 billion in just the next several years by 2030. Great spot to be, good end growth drivers and good, strong end demand for our semiconductor industry. If we go another layer down and say, all right, what is all this equipment that people are buying? What is in that factory? If you go to a semiconductor fab, they are making that chip there that is in the middle. It is kind of a complex drawing there, cross-section of what a semiconductor chip looks like these days. You can see multiple features, many layers, many different features that are made on that semiconductor chip. To do that, you can see it's a circular repeating process in that semiconductor fab of photolithography, complex photolithography equipment to make the images, etching and deposition equipment to put the patterns down and etch away and create the patterns that you need. You need to measure it and make sure everything's fine down to a nanometer scale. Every one of those segments has very complex equipment to produce that semiconductor chip. This cycle repeats over 80, 90 times, over 1,000 process steps just to make one wafer. It can take over three months to make that wafer. Not very simple. If you look at where MKS plays in this space, we're in 85% of those pieces of equipment that are on the fab floor. Broad exposure, true critical technologies that enable that equipment to run in every one of those steps. We're not just selling some components, a screw or other part. We are selling critical enabling technologies. One example is RF power, which is critical for creating plasma and etching away very, very fine features. You need very precise power, very much controlled power. That's a key area of strength for MKS that we are in, particularly in etch and deposition equipment, where we provide that main kind of heartbeat of that piece of equipment. We also have been getting into the photolithography and inspection space with the acquisition of a photonics business back in 2016. There we are, again, enabling critical optics subassemblies into lithography and metrology systems to enable those to continue to push the limits of what we can do for our customers. We will go to the next slide. Basically, as we look at the semiconductor business, you see strong end market growth, great long legacy position that MKS has had over the last 60 years of providing solutions in that semiconductor space and emerging with the lithography and metrology space and the photonics that is growing and building a base of as well. That chip cannot run just having a chip. It has got to go into a system. It has got to go into an overall advanced electronic device, which includes wafer level packaging, package substrate, and printed circuit boards. That leads into the next segment, which is electronics and packaging that Ram had covered. We play a critical role, just like we do in semiconductor space, in the electronics and packaging space. We have electronic chemistry solutions that create those patterns on the printed circuit boards and those package substrates. We have equipment that goes along with those chemicals. We also have laser drilling equipment to create the features and the interconnects between the layers of the printed circuit boards. In the past, the semiconductor industry has improved performance, improved costs, and improved power efficiency through improving the semiconductor chip. We've gotten to a point now where these, especially these complex AI systems, are creating needs that we do not need just innovations on the semiconductor chip, but we need that package. Every layer you see below the chip to improve as well. Need better performance, more layers, quicker connections, less power consumption. There is a lot of innovation now. You're probably hearing a lot about AI and packaging and the different constructions to help enable those complex systems. We're at the heart of that with our chemistry solutions and our laser drilling solutions. To kind of finalize here on the market overview, this chart really shows the value chain and the supply chain of where we play, all the way from the components that we make to the equipment that we feed into, the manufacturers that make the chips, and then ultimately to the end device OEMs. You can see that both on the semiconductor side, where we sell to the big five equipment makers, and on the electronics and packaging side, where we feed chemistry and capital equipment to printed circuit board manufacturers that you see there and package substrate manufacturers, we are foundational to both sides of those industries. That equipment cannot run without our subsystems, and those PCBs cannot be made without our chemistries. As the technology continues to evolve, we are key enablers partnering with our customers to develop solutions in those areas. To catch you up a little bit on what's 2025 key financials, if you may, you saw the 2024 numbers. If you look at our three quarters of actuals and our fourth quarter guide, we are well on our way to be $3.9 billion, close to $3.9 billion of top line, which is about a 9% growth year to date from prior year. EPS, which had a strong growth in 2023 to 2024, is projected to grow more at about 22%. This is, again, year to date growth. Free cash flow, in the first three quarters of 2025, we have almost made the free cash flow we did all of 2024. We are well on track to exceed our free cash flow growth this year compared to last year. Last year, we were about average 11% of revenue. In this quarter, we'll be about 15% of revenue. Free cash flow generation has been strong. We are very good at executing, changing, agile at responding to the geopolitics and the market requirements. We are very focused on managing our cost as we grow our top line. To get into some of the more specifics of each business segment that Keith just went over, $415 million in top line for semiconductor in Q3. That is quarter-over-quarter, slightly down, mostly because the NAND upgrade cycle, which tends to be a little lumpy, was very strong in Q2, but was not as high in Q3. The fundamentals of the semiconductor business remain very strong, but the high Q2 NAND impact made the sequential comparisons negative. The year-over-year change, you can see is over 10%, and our guide for Q4 remains at Q3 levels. Again, we'll see less impact of NAND because it's no more driven by upgrades at this point. Electronics and packaging, which is part of the acquisition that I talked about and the details of what Keith just went through, quarter- over-quarter, 9% improvement in Q3. Year-over-year, we have a 25% growth in that business, and it's chemistry and chemistry equipment. And a good part of that equipment business in particular is driven by the AI demand. We have a strong guide getting into Q4 as well at $295 million. Specialty industrial, like I said, it's got a bunch of segments within it. GDP is a good measure to track that. PMI index is a good measure to go by. We are stabilized. It's still below what it used to be, but we started the year at about $270 million-$275 million a quarter. We are happy to exceed, get to this 284 level, 280 level in Q3, Q4. It is really tied to mostly auto industry and general industrial, which are the two bigger segments within that. Again, like I said, PMI has slightly started ticking above 50 now. We hope as it gets to its more normal levels, we will start seeing much more profitability in cash generation. To touch upon our capital allocation strategy, we are expanding our CapEx to get closer to our customers, mostly and to modernize our manufacturing facilities. We are building a new plant in Malaysia, and we have acquired land and built a chemistry plant in Thailand. We also have some activities going on in China and in Europe and Romania. Our CapEx tends to be about 4%-5% of our revenue, closer to the 4% range, and that'll continue for one more year, and then it'll get back more to normal levels of 3%-4%. Investing in ourself, investing in supporting the growth of the business and continuity of the business is primary focus. Investing in technology remains our primary focus for capital allocation strategy. The second focus is we pay a modest dividend, about $60 million a year, and strengthening our balance sheet by lowering our leverage. That's going to be our primary focus after the first two for the remaining period of time till we get our debt down to 2x-2.5x net leverage. The debt is nothing new for MKS. We always borrowed money for acquisitions. We borrowed money for the Atotech acquisitions, and we've been paying it down. It's just the discipline of paying it down. That remains our primary focus. Once we get our debt down to more acceptable levels of 2.5x net, we can get into a more broader capital allocation strategy that includes returning cash back to shareholders, if you may, and also inorganic growth support, which is a core part of our strategy. We probably do not need to do any large acquisitions like the ones we have done in the past. The ones that we look at more will be tuck-ins and bolt-ons to our existing core businesses. We did buy back a small amount of stock in Q1 of this year, mostly to offset dilution, and that is very opportunistic. To sum it up, we are in some very secular growth markets as we went through the segments of market we are in. We are very focused on driving profitability and creating value for our shareholders, and we will continue to focus on cash generation and deleveraging and strengthening our balance sheet. As we look at 2026, given the tailwind we have on the top line, given our cost structure and the cash generation and a strengthening balance sheet, we are looking at a very good 2026 as we look ahead. With that, I will stop and take any questions. Absolutely. If there are any questions, just feel free to raise your hand, and we'll work you into the dialogue. Ram, maybe just a high-level question. As you think about the technology portfolio that you do bring to bear, you checked a lot of boxes as we looked at the diagram around wafer construction or chip construction. How do you differentiate on the technology side versus your peers? Is it breadth, just having the touch points that you do, or just elaborate on that? Absolutely. Keith, do you want to start with that? Sure. I think one of the key things we do is, again, with the breadth of the products that we have, we have close relationships with our customers. What we ultimately do is we solve our customers' hardest problems, as Ram had said earlier. We really do, when those technological changes happen, we are right there with them. We can see it coming with them. We can develop those solutions and enable their equipment to do what it needs to do. I think it is really about customer intimacy, which our broad portfolio enables us to get even closer and to see those inflections coming earlier and develop the solutions that are differentiating in the marketplace. Yeah. Yeah. The differentiation that our R&D does is reflected in the differentiation we bring to our product that provides the stickiness in the business, the price stability, and the margin. The R&D dollars we spend are very well put to use. That's the core strength there. Yeah. You mentioned service several times in your overview. How does that mix in with the service revenue streams mix in with those that are going to be more directly tied to CapEx? What's the mix there? Who's trying to change that dynamic? I'll start, and Keith runs the service business, so he can certainly talk more about it. We are very, very happy with the service component in our business. The acquisition of the Atotech business and the growth of our EMP was primarily focused on driving broader portfolio products to minimize the volatility of semiconductor business, if you may. The service side of our business, including the chemistry, is about 40% of our revenue with very high margins. As that grows, it provides more stability to our overall revenue stream. Keith, feel free to add on anything more you may. Yeah, yeah. I think the service business in total is about $500 million of that kind of 40% that you said. It has been growing. Obviously, as the install base grows, as we sell more equipment, that service business naturally grows. We have really focused on engaging the end users who are using the products and our OEM partners and finding ways to add more value even in the aftermarket. We have been able to do that and kind of outpace the growth on the service side and bring more value, leading to increased margins as well. We have service associated with both semiconductor, photonics, and MSD. To Keith's point, as the install rate base increases, the service revenue potential is going to increase. The profitability of that segment is very attractive for us. Yeah. You made mention at the end, you feel good about where you sit heading into 2026 around growth. How should we be thinking about MKS growth in the context of WFE, WFE growth as a barometer for how fast that you could grow? Yeah. I can, again, start, and Keith can talk more about the WFE impact to our business. Where we sit, we are very happy with the level of execution and the focus we have had in deleveraging and strengthening our balance sheet. We are happy with the investments in the portfolio that we have and the general shift in the discussion that we are having with you folks from just semiconductor to electronics and packaging as well. The acquisition that we did a few years ago is really hitting its stride now. We are seeing it in the top line, and AI is going to only take it forward. When you look forward into the years ahead, we think we are in a very well position to both drive top line and profitability. That is what I meant. WFE, you can talk more to it. Yeah. Again, I highlighted the kind of history of WFE growth and the forecast of it going forward from the industry analysts. MKS has a long history of outperforming WFE. We've outperformed WFE about 200 basis points. We've done that over the last several decades. Everything we see going forward, we should be able to continue to outperform WFE by about that 200 basis points. Okay. What about the margin profile, thinking about the near-term margin profile, the puts and takes on gross margin given where the business is currently trending? Yeah. So if you look at 2024, all the way up to actually Q1 of 2025, we were well ahead of 47%. We finished Q1 at 47.4%. Since then, two things happened. One is we started seeing the impact of tariffs starting Q2. And we started seeing the impact of mix, the equipment side of the chemistry business that I talked about earlier. We started seeing the impact of that. That equipment business is lower than the corporate average margins, if you may. But it's a good problem to have because it guarantees future very high margin chemistry sales. Among our competition, the main competition we have are. We are the only ones who sell the equipment. That model of equipment plus chemistry works very well for us because more equipment out there, it's more chemistry for us. The attach rate after five years, we say, is about 85%. In the earlier years, it is higher than that. That is very attractive for us. That mix did hurt our overall gross margin in the short term. Regarding tariffs, we had 115 basis points of impact in Q2, without which we would have been close to 48%. We had 80 basis points of impact in Q3. We would have been 47.4% without that. As of Q4, we have offset the impact of tariffs dollar for dollar. However, just because of math, because we do not mark up those tariffs as we pass through what we need to pass through, there will be a 50 basis points impact to the gross margin, although no impact to the dollars itself. We will offset that. We are very confident of getting back to our mid-40s margin, 47%+, with just ongoing operational excellence programs that we are running and once we get to a more normalized mix. One thing that we've been asking all of the companies here is to try to get some sense of as to how real is AI, right, and how you may be applying it. Yes, there's a lot of push to make it external customer, work it into customer solutions. Internally, I'm curious if you have any areas or examples that you could point to where you've applied AI tools and are driving some efficiencies or savings that you'd call out. So internally, you mean within MKS or top line? Internally. Internally. I can start and Keith, if you can think of anything specific too. We are early in our adoption of AI. We have teams of specialists in AI that's working with us. We are trying to train more experts to be embedded in the functions, if you may, functional leaders. Within finance, for example, there's a lot that AI can do, and we are early stages. We are scratching the surface. There's things we can do in R&D. That is going to make our OpEx, in particular, a lot more scalable as we use more of that. We are in very early innings right now. Anything specific you want to add? No. Yeah. Did you effort to delever the balance sheet to your target level? Have you put a timeline on when you think you could get to 2.5? We haven't put a timeline. We are very focused on getting to 2.5x. And our past actions of prepayments, we've been putting money where our mouth is. The wild card or the unknown there is really the top line. At our current muted top lines, if you may, 2023, 2024 was very flat. We've been able to manage about $500 million of payments around that every year, prepayments and mandatory payments together. But as that top line comes back to more normal levels, we can certainly accelerate that. So that's the bit of the unknown. Plus anything else we can do from a portfolio point of view or to accelerate that, we will look at. So we haven't given a timeline, but we are confident that we'll get to the levels we want to. And like I said, it's not uncommon for MKS. It's just that the last borrowing was larger, and the market didn't get the top line where we needed it to be. It has taken a little longer. The discipline to get it back to acceptable levels is very critical for us. We've always done that. Yeah. Just on the specialty industrial segment, you mentioned that has crept up as the years unfolded from where you began the year. Are you seeing any green shoots of more substantive improvement in that part of the business, any particular area? Not really. I think the two, we've seen slight growth in aerospace and defense and in life health sciences, if you may. The two big segments there are general industrial and auto. As you all know, in the auto news, the last one was slightly better, but not a meaningful impact yet. Unless we see something there, hopefully the interest rate cuts will drive further demand. Unless we see something meaningful in those two segments, factory build, and we have lasers that go into the factories, that's the specialty industrial component there. The business related to the auto, we won't see a step change from where we are. Yeah. Is that a global business, or is it exposed to any particular region? Nope, 100% global. Okay. Any region stand out as maybe better than another? I'm thinking maybe North America might be better than Europe, but. No, we have businesses spread all over the world. We have local for local manufacturing all over the world. I mean, if you look at MKS, our China exposure is about lower 20%, 22%. Most of that is related to the chemistry and chemistry business, if you may. The China manufacturing is all local, done in China. We have factories in Europe, and we have factories in North America. Very good. Again, maybe last call, if there's any questions before we wrap here. No? We'll call it then. Thank you very much, Ram. Thank you. Thank you all. Appreciate it. Good to see you.

Speaker 2: Are we at time? Okay, I think we'll go ahead and get started. Good afternoon, everybody. Welcome to the session for MKS. I'm Rob Mason, the Senior Analyst at Baird that covers advanced industrial technology. Certainly want to welcome MKS to the Industrial Conference. As you may be aware, MKS is a leading technology solutions and subsystems provider into leading-edge semiconductor manufacturing, electronics, and packaging. Very pleased to have Ram Mayampurath, the Executive Vice President and CFO, with us, as well as Keith Loop, who's the Vice President of their Vacuum Systems and Services business. Ram's going to go through a few slides. There should be a little bit of time at the end for Q&A, and if you have any questions, direct those up to us via the iPad, and I'll work those in. Are we at time? are we at time Okay, I think we'll go ahead and get started. okay i think we'll go ahead and get started Good afternoon, everybody. good afternoon everybody Welcome to the session for MKS. welcome to the session for mks I'm Rob Mason, the Senior Analyst at Baird that covers advanced industrial technology. i'm rob mason the senior analyst at baird that covers advanced industrial technology Certainly want to welcome MKS to the Industrial Conference. certainly want to welcome mks to the industrial conference As you may be aware, MKS is a leading technology solutions and subsystems provider into leading-edge semiconductor manufacturing, electronics, and packaging. as you may be aware mks is a leading technology solutions and subsystems provider into leading-edge semiconductor manufacturing electronics and packaging Very pleased to have Ram Mayampurath, the Executive Vice President and CFO, with us, as well as Keith Loop, who's the Vice President of their Vacuum Systems and Services business. very pleased to have ram mayampurath the executive vice president and cfo with us as well as keith loop who's the vice president of their vacuum systems and services business Ram's going to go through a few slides. ram's going to go through a few slides There should be a little bit of time at the end for Q&A, and if you have any questions, direct those up to us via the iPad, and I'll work those in. there should be a little bit of time at the end for q&a and if you have any questions direct those up to us via the ipad and i'll work those in

Speaker 1: Thank you, Rob. Hello, everybody. Let's just get right in. We have quite a few. MKS is a foundational leader in technology. We'll get into the details of that in a minute here, but we provide precision solutions to our customers. We are engaged in solving our customers' toughest problems, if you may. As the technology demand gets more complex, as the demand on equipment and technology increases, it's good for MKS as we get into product miniaturization and more technology requirements. It works to our advantage. We have a very strong, close relationship with our customers. We do co-development with them. The proximity to the customers and the technology discussions is a core strength for MKS. We are also very focused on driving value for our shareholders. Our execution remains very strong. We'll get into some of the numbers here in a minute. Thank you, Rob. thank you rob Hello, everybody. hello everybody Let's just get right in. let's just get right in We have quite a few. we have quite a few MKS is a foundational leader in technology. mks is a foundational leader in technology We'll get into the details of that in a minute here, but we provide precision solutions to our customers. we'll get into the details of that in a minute here but we provide precision solutions to our customers We are engaged in solving our customers' toughest problems, if you may. we are engaged in solving our customers' toughest problems if you may As the technology demand gets more complex, as the demand on equipment and technology increases, it's good for MKS as we get into product miniaturization and more technology requirements. as the technology demand gets more complex as the demand on equipment and technology increases it's good for mks as we get into product miniaturization and more technology requirements It works to our advantage. it works to our advantage We have a very strong, close relationship with our customers. we have a very strong close relationship with our customers We do co-development with them. we do co-development with them The proximity to the customers and the technology discussions is a core strength for MKS. the proximity to the customers and the technology discussions is a core strength for mks We are also very focused on driving value for our shareholders. we are also very focused on driving value for our shareholders Our execution remains very strong. our execution remains very strong We'll get into some of the numbers here in a minute. we'll get into some of the numbers here in a minute We are very focused on driving profitability and cash flow. These are 2024 numbers, and we'll take you through year to date 2025 as well. $3.6 billion, we spent about 8% on R&D. It's the technology differentiation that helps, that separates us from our competition and also gives us the price and the margin advantage that we have. We are about 25% EBITDA, and we'll get into some of the other numbers here in more detail in the slides ahead. The 85% of surround the chamber strategy and the 70% of the steps in the chemical business that we are in. We'll talk about that in a little detail in the slides ahead. We are very focused on driving profitability and cash flow. we are very focused on driving profitability and cash flow These are 2024 numbers, and we'll take you through year to date 2025 as well. $3.6 billion, we spent about 8% on R&D. these are 2024 numbers and we'll take you through year to date 2025 as well $3.6 billion we spent about 8% on r&d It's the technology differentiation that helps, that separates us from our competition and also gives us the price and the margin advantage that we have. it's the technology differentiation that helps that separates us from our competition and also gives us the price and the margin advantage that we have We are about 25% EBITDA, and we'll get into some of the other numbers here in more detail in the slides ahead. we are about 25% ebitda and we'll get into some of the other numbers here in more detail in the slides ahead The 85% of surround the chamber strategy and the 70% of the steps in the chemical business that we are in. the 85% of surround the chamber strategy and the 70% of the steps in the chemical business that we are in We'll talk about that in a little detail in the slides ahead. we'll talk about that in a little detail in the slides ahead If you look at our main market segments, these are our three main market segments: semiconductor, which includes semiconductor, traditional semiconductor that MKS has been involved in, and also world-class optics, which is the lithometrology and inspection. Electronics and packaging, that came out of the large acquisition we did about three years back of Atotech business. And specialty industrial, which is a collection of several markets, if you may, includes automotive. It includes general industrial. It includes aerospace and defense, life health sciences and research. By no way is it commodity business. It is very profitable, high-margin businesses. We will get into all of them in very much detail here in the slides ahead. Just to give you an overview, those are the key market segments we play in. To take you through the next couple of slides, Keith will take you through the technology part. If you look at our main market segments, these are our three main market segments: semiconductor, which includes semiconductor, traditional semiconductor that MKS has been involved in, and also world-class optics, which is the lithometrology and inspection. if you look at our main market segments these are our three main market segments semiconductor which includes semiconductor traditional semiconductor that mks has been involved in and also world-class optics which is the lithometrology and inspection Electronics and packaging, that came out of the large acquisition we did about three years back of Atotech business. electronics and packaging that came out of the large acquisition we did about three years back of atotech business And specialty industrial, which is a collection of several markets, if you may, includes automotive. and specialty industrial which is a collection of several markets if you may includes automotive It includes general industrial. it includes general industrial It includes aerospace and defense, life health sciences and research. it includes aerospace and defense life health sciences and research By no way is it commodity business. It is very profitable, high-margin businesses. by no way is it commodity business. it is very profitable high-margin businesses We will get into all of them in very much detail here in the slides ahead. we will get into all of them in very much detail here in the slides ahead Just to give you an overview, those are the key market segments we play in. just to give you an overview those are the key market segments we play in To take you through the next couple of slides, Keith will take you through the technology part. to take you through the next couple of slides keith will take you through the technology part

Speaker 3: All right, thank you, Ram. As Ram said, semiconductor is our core business, as you saw on the last slide. As you can see, the semiconductor business has a long history of steady growth over the last several decades, whether it's semiconductors for PCs or semiconductors for your mobile or handheld device. There's been strong, steady growth of chip sales over that period. Now as we look forward in the last few years, and as we look forward, there's still strong growth drivers in the semi business, really driven by AI, big data, or any other high-performance computing. There's a pretty broad consensus in the industry that the semiconductor industry is going to grow to about a trillion dollars in revenue by 2030. There are even some more recent reports of even numbers significantly higher than that by 2030. All right, thank you, Ram. all right thank you ram As Ram said, semiconductor is our core business, as you saw on the last slide. as ram said semiconductor is our core business as you saw on the last slide As you can see, the semiconductor business has a long history of steady growth over the last several decades, whether it's semiconductors for PCs or semiconductors for your mobile or handheld device. as you can see the semiconductor business has a long history of steady growth over the last several decades whether it's semiconductors for pcs or semiconductors for your mobile or handheld device There's been strong, steady growth of chip sales over that period. there's been strong steady growth of chip sales over that period Now as we look forward in the last few years, and as we look forward, there's still strong growth drivers in the semi business, really driven by AI, big data, or any other high-performance computing. now as we look forward in the last few years and as we look forward there's still strong growth drivers in the semi business really driven by ai big data or any other high-performance computing There's a pretty broad consensus in the industry that the semiconductor industry is going to grow to about a trillion dollars in revenue by 2030. there's a pretty broad consensus in the industry that the semiconductor industry is going to grow to about a trillion dollars in revenue by 2030 There are even some more recent reports of even numbers significantly higher than that by 2030. there are even some more recent reports of even numbers significantly higher than that by 2030 There is a lot of good, strong end demand growth for semiconductor chips. Walking the next layer back to kind of how that impacts MKS, to make all those chips, you need to build factories and fill those with equipment. There is a measure called wafer fab equipment spending, which is how much money is spent on equipment every year. You can see in the last five or six years, there has been a significant increase in equipment spending from about $30 billion five or six years ago to over $100 billion now in the last several years. As the chips have become more complex to make, the revenue that you saw there on the revenue side, it is the equipment intensity and the amount of money to spend to make that chip that has gone up as well. There is a lot of good, strong end demand growth for semiconductor chips. there is a lot of good strong end demand growth for semiconductor chips Walking the next layer back to kind of how that impacts MKS, to make all those chips, you need to build factories and fill those with equipment. walking the next layer back to kind of how that impacts mks to make all those chips you need to build factories and fill those with equipment There is a measure called wafer fab equipment spending, which is how much money is spent on equipment every year. there is a measure called wafer fab equipment spending which is how much money is spent on equipment every year You can see in the last five or six years, there has been a significant increase in equipment spending from about $30 billion five or six years ago to over $100 billion now in the last several years. you can see in the last five or six years, there has been a significant increase in equipment spending from about $30 billion five or six years ago to over $100 billion now in the last several years As the chips have become more complex to make, the revenue that you saw there on the revenue side, it is the equipment intensity and the amount of money to spend to make that chip that has gone up as well. as the chips have become more complex to make the revenue that you saw there on the revenue side, it is the equipment intensity and the amount of money to spend to make that chip that has gone up as well Again, more factories need to be built, more equipment needs to be purchased. If we hit the trillion dollars in revenue by 2030 on kind of a similar intensity assumption, that is going to mean that we need to increase WFE from a little over $100 billion today to well over $150 billion in just the next several years by 2030. Great spot to be, good end growth drivers and good, strong end demand for our semiconductor industry. If we go another layer down and say, all right, what is all this equipment that people are buying? What is in that factory? If you go to a semiconductor fab, they are making that chip there that is in the middle. It is kind of a complex drawing there, cross-section of what a semiconductor chip looks like these days. Again, more factories need to be built, more equipment needs to be purchased. again more factories need to be built more equipment needs to be purchased If we hit the trillion dollars in revenue by 2030 on kind of a similar intensity assumption, that is going to mean that we need to increase WFE from a little over $100 billion today to well over $150 billion in just the next several years by 2030. if we hit the trillion dollars in revenue by 2030 on kind of a similar intensity assumption, that is going to mean that we need to increase wfe from a little over $100 billion today to well over $150 billion in just the next several years by 2030 Great spot to be, good end growth drivers and good, strong end demand for our semiconductor industry. great spot to be good end growth drivers and good strong end demand for our semiconductor industry If we go another layer down and say, all right, what is all this equipment that people are buying? if we go another layer down and say all right what is all this equipment that people are buying What is in that factory? what is in that factory If you go to a semiconductor fab, they are making that chip there that is in the middle. if you go to a semiconductor fab, they are making that chip there that is in the middle It is kind of a complex drawing there, cross-section of what a semiconductor chip looks like these days. it is kind of a complex drawing there cross-section of what a semiconductor chip looks like these days You can see multiple features, many layers, many different features that are made on that semiconductor chip. To do that, you can see it's a circular repeating process in that semiconductor fab of photolithography, complex photolithography equipment to make the images, etching and deposition equipment to put the patterns down and etch away and create the patterns that you need. You need to measure it and make sure everything's fine down to a nanometer scale. Every one of those segments has very complex equipment to produce that semiconductor chip. This cycle repeats over 80, 90 times, over 1,000 process steps just to make one wafer. It can take over three months to make that wafer. Not very simple. You can see multiple features, many layers, many different features that are made on that semiconductor chip. you can see multiple features many layers many different features that are made on that semiconductor chip To do that, you can see it's a circular repeating process in that semiconductor fab of photolithography, complex photolithography equipment to make the images, etching and deposition equipment to put the patterns down and etch away and create the patterns that you need. to do that you can see it's a circular repeating process in that semiconductor fab of photolithography complex photolithography equipment to make the images etching and deposition equipment to put the patterns down and etch away and create the patterns that you need You need to measure it and make sure everything's fine down to a nanometer scale. you need to measure it and make sure everything's fine down to a nanometer scale Every one of those segments has very complex equipment to produce that semiconductor chip. every one of those segments has very complex equipment to produce that semiconductor chip This cycle repeats over 80, 90 times, over 1,000 process steps just to make one wafer. this cycle repeats over 80, 90 times over 1,000 process steps just to make one wafer It can take over three months to make that wafer. it can take over three months to make that wafer Not very simple. not very simple If you look at where MKS plays in this space, we're in 85% of those pieces of equipment that are on the fab floor. Broad exposure, true critical technologies that enable that equipment to run in every one of those steps. We're not just selling some components, a screw or other part. We are selling critical enabling technologies. One example is RF power, which is critical for creating plasma and etching away very, very fine features. You need very precise power, very much controlled power. That's a key area of strength for MKS that we are in, particularly in etch and deposition equipment, where we provide that main kind of heartbeat of that piece of equipment. We also have been getting into the photolithography and inspection space with the acquisition of a photonics business back in 2016. If you look at where MKS plays in this space, we're in 85% of those pieces of equipment that are on the fab floor. if you look at where mks plays in this space we're in 85% of those pieces of equipment that are on the fab floor Broad exposure, true critical technologies that enable that equipment to run in every one of those steps. broad exposure true critical technologies that enable that equipment to run in every one of those steps We're not just selling some components, a screw or other part. we're not just selling some components a screw or other part We are selling critical enabling technologies. we are selling critical enabling technologies One example is RF power, which is critical for creating plasma and etching away very, very fine features. one example is rf power which is critical for creating plasma and etching away very very fine features You need very precise power, very much controlled power. you need very precise power very much controlled power That's a key area of strength for MKS that we are in, particularly in etch and deposition equipment, where we provide that main kind of heartbeat of that piece of equipment. that's a key area of strength for mks that we are in particularly in etch and deposition equipment where we provide that main kind of heartbeat of that piece of equipment We also have been getting into the photolithography and inspection space with the acquisition of a photonics business back in 2016. we also have been getting into the photolithography and inspection space with the acquisition of a photonics business back in 2016 There we are, again, enabling critical optics subassemblies into lithography and metrology systems to enable those to continue to push the limits of what we can do for our customers. We will go to the next slide. Basically, as we look at the semiconductor business, you see strong end market growth, great long legacy position that MKS has had over the last 60 years of providing solutions in that semiconductor space and emerging with the lithography and metrology space and the photonics that is growing and building a base of as well. That chip cannot run just having a chip. It has got to go into a system. It has got to go into an overall advanced electronic device, which includes wafer level packaging, package substrate, and printed circuit boards. That leads into the next segment, which is electronics and packaging that Ram had covered. There we are, again, enabling critical optics subassemblies into lithography and metrology systems to enable those to continue to push the limits of what we can do for our customers. there we are again enabling critical optics subassemblies into lithography and metrology systems to enable those to continue to push the limits of what we can do for our customers We will go to the next slide. we will go to the next slide Basically, as we look at the semiconductor business, you see strong end market growth, great long legacy position that MKS has had over the last 60 years of providing solutions in that semiconductor space and emerging with the lithography and metrology space and the photonics that is growing and building a base of as well. basically as we look at the semiconductor business you see strong end market growth great long legacy position that mks has had over the last 60 years of providing solutions in that semiconductor space and emerging with the lithography and metrology space and the photonics that is growing and building a base of as well That chip cannot run just having a chip. It has got to go into a system. It has got to go into an overall advanced electronic device, which includes wafer level packaging, package substrate, and printed circuit boards. that chip cannot run just having a chip. it has got to go into a system. it has got to go into an overall advanced electronic device which includes wafer level packaging package substrate and printed circuit boards That leads into the next segment, which is electronics and packaging that Ram had covered. that leads into the next segment which is electronics and packaging that ram had covered We play a critical role, just like we do in semiconductor space, in the electronics and packaging space. We have electronic chemistry solutions that create those patterns on the printed circuit boards and those package substrates. We have equipment that goes along with those chemicals. We also have laser drilling equipment to create the features and the interconnects between the layers of the printed circuit boards. In the past, the semiconductor industry has improved performance, improved costs, and improved power efficiency through improving the semiconductor chip. We've gotten to a point now where these, especially these complex AI systems, are creating needs that we do not need just innovations on the semiconductor chip, but we need that package. Every layer you see below the chip to improve as well. Need better performance, more layers, quicker connections, less power consumption. We play a critical role, just like we do in semiconductor space, in the electronics and packaging space. we play a critical role just like we do in semiconductor space in the electronics and packaging space We have electronic chemistry solutions that create those patterns on the printed circuit boards and those package substrates. we have electronic chemistry solutions that create those patterns on the printed circuit boards and those package substrates We have equipment that goes along with those chemicals. we have equipment that goes along with those chemicals We also have laser drilling equipment to create the features and the interconnects between the layers of the printed circuit boards. we also have laser drilling equipment to create the features and the interconnects between the layers of the printed circuit boards In the past, the semiconductor industry has improved performance, improved costs, and improved power efficiency through improving the semiconductor chip. in the past the semiconductor industry has improved performance improved costs and improved power efficiency through improving the semiconductor chip We've gotten to a point now where these, especially these complex AI systems, are creating needs that we do not need just innovations on the semiconductor chip, but we need that package. we've gotten to a point now where these especially these complex ai systems are creating needs that we do not need just innovations on the semiconductor chip but we need that package Every layer you see below the chip to improve as well. every layer you see below the chip to improve as well Need better performance, more layers, quicker connections, less power consumption. need better performance more layers quicker connections less power consumption There is a lot of innovation now. You're probably hearing a lot about AI and packaging and the different constructions to help enable those complex systems. We're at the heart of that with our chemistry solutions and our laser drilling solutions. To kind of finalize here on the market overview, this chart really shows the value chain and the supply chain of where we play, all the way from the components that we make to the equipment that we feed into, the manufacturers that make the chips, and then ultimately to the end device OEMs. There is a lot of innovation now. there is a lot of innovation now You're probably hearing a lot about AI and packaging and the different constructions to help enable those complex systems. you're probably hearing a lot about ai and packaging and the different constructions to help enable those complex systems We're at the heart of that with our chemistry solutions and our laser drilling solutions. we're at the heart of that with our chemistry solutions and our laser drilling solutions To kind of finalize here on the market overview, this chart really shows the value chain and the supply chain of where we play, all the way from the components that we make to the equipment that we feed into, the manufacturers that make the chips, and then ultimately to the end device OEMs. to kind of finalize here on the market overview this chart really shows the value chain and the supply chain of where we play all the way from the components that we make to the equipment that we feed into the manufacturers that make the chips and then ultimately to the end device oems You can see that both on the semiconductor side, where we sell to the big five equipment makers, and on the electronics and packaging side, where we feed chemistry and capital equipment to printed circuit board manufacturers that you see there and package substrate manufacturers, we are foundational to both sides of those industries. That equipment cannot run without our subsystems, and those PCBs cannot be made without our chemistries. As the technology continues to evolve, we are key enablers partnering with our customers to develop solutions in those areas. You can see that both on the semiconductor side, where we sell to the big five equipment makers, and on the electronics and packaging side, where we feed chemistry and capital equipment to printed circuit board manufacturers that you see there and package substrate manufacturers, we are foundational to both sides of those industries. you can see that both on the semiconductor side where we sell to the big five equipment makers and on the electronics and packaging side where we feed chemistry and capital equipment to printed circuit board manufacturers that you see there and package substrate manufacturers we are foundational to both sides of those industries That equipment cannot run without our subsystems, and those PCBs cannot be made without our chemistries. that equipment cannot run without our subsystems and those pcbs cannot be made without our chemistries As the technology continues to evolve, we are key enablers partnering with our customers to develop solutions in those areas. as the technology continues to evolve we are key enablers partnering with our customers to develop solutions in those areas

Speaker 1: To catch you up a little bit on what's 2025 key financials, if you may, you saw the 2024 numbers. If you look at our three quarters of actuals and our fourth quarter guide, we are well on our way to be $3.9 billion, close to $3.9 billion of top line, which is about a 9% growth year to date from prior year. EPS, which had a strong growth in 2023 to 2024, is projected to grow more at about 22%. This is, again, year to date growth. Free cash flow, in the first three quarters of 2025, we have almost made the free cash flow we did all of 2024. We are well on track to exceed our free cash flow growth this year compared to last year. Last year, we were about average 11% of revenue. To catch you up a little bit on what's 2025 key financials, if you may, you saw the 2024 numbers. to catch you up a little bit on what's 2025 key financials if you may you saw the 2024 numbers If you look at our three quarters of actuals and our fourth quarter guide, we are well on our way to be $3.9 billion, close to $3.9 billion of top line, which is about a 9% growth year to date from prior year. if you look at our three quarters of actuals and our fourth quarter guide we are well on our way to be $3.9 billion close to $3.9 billion of top line which is about a 9% growth year to date from prior year EPS, which had a strong growth in 2023 to 2024, is projected to grow more at about 22%. eps which had a strong growth in 2023 to 2024 is projected to grow more at about 22% This is, again, year to date growth. this is again year to date growth Free cash flow, in the first three quarters of 2025, we have almost made the free cash flow we did all of 2024. free cash flow in the first three quarters of 2025 we have almost made the free cash flow we did all of 2024 We are well on track to exceed our free cash flow growth this year compared to last year. we are well on track to exceed our free cash flow growth this year compared to last year Last year, we were about average 11% of revenue. last year we were about average 11% of revenue In this quarter, we'll be about 15% of revenue. Free cash flow generation has been strong. We are very good at executing, changing, agile at responding to the geopolitics and the market requirements. We are very focused on managing our cost as we grow our top line. To get into some of the more specifics of each business segment that Keith just went over, $415 million in top line for semiconductor in Q3. That is quarter-over-quarter, slightly down, mostly because the NAND upgrade cycle, which tends to be a little lumpy, was very strong in Q2, but was not as high in Q3. The fundamentals of the semiconductor business remain very strong, but the high Q2 NAND impact made the sequential comparisons negative. The year-over-year change, you can see is over 10%, and our guide for Q4 remains at Q3 levels. In this quarter, we'll be about 15% of revenue. in this quarter we'll be about 15% of revenue Free cash flow generation has been strong. free cash flow generation has been strong We are very good at executing, changing, agile at responding to the geopolitics and the market requirements. we are very good at executing changing agile at responding to the geopolitics and the market requirements We are very focused on managing our cost as we grow our top line. we are very focused on managing our cost as we grow our top line To get into some of the more specifics of each business segment that Keith just went over, $415 million in top line for semiconductor in Q3. to get into some of the more specifics of each business segment that keith just went over $415 million in top line for semiconductor in q3 That is quarter- over- quarter, slightly down, mostly because the NAND upgrade cycle, which tends to be a little lumpy, was very strong in Q2, but was not as high in Q3. that is quarter- over- quarter slightly down mostly because the nand upgrade cycle which tends to be a little lumpy was very strong in q2 but was not as high in q3 The fundamentals of the semiconductor business remain very strong, but the high Q2 NAND impact made the sequential comparisons negative. the fundamentals of the semiconductor business remain very strong but the high q2 nand impact made the sequential comparisons negative The year- over- year change, you can see is over 10%, and our guide for Q4 remains at Q3 levels. the year- over- year change you can see is over 10% and our guide for q4 remains at q3 levels Again, we'll see less impact of NAND because it's no more driven by upgrades at this point. Electronics and packaging, which is part of the acquisition that I talked about and the details of what Keith just went through, quarter- over-quarter, 9% improvement in Q3. Year-over-year, we have a 25% growth in that business, and it's chemistry and chemistry equipment. And a good part of that equipment business in particular is driven by the AI demand. We have a strong guide getting into Q4 as well at $295 million. Specialty industrial, like I said, it's got a bunch of segments within it. GDP is a good measure to track that. PMI index is a good measure to go by. We are stabilized. It's still below what it used to be, but we started the year at about $270 million-$275 million a quarter. Again, we'll see less impact of NAND because it's no more driven by upgrades at this point. again we'll see less impact of nand because it's no more driven by upgrades at this point Electronics and packaging, which is part of the acquisition that I talked about and the details of what Keith just went through, quarter- over- quarter, 9% improvement in Q3. electronics and packaging which is part of the acquisition that i talked about and the details of what keith just went through quarter- over- quarter 9% improvement in q3 Year- over- year, we have a 25% growth in that business, and it's chemistry and chemistry equipment. year- over- year we have a 25% growth in that business and it's chemistry and chemistry equipment And a good part of that equipment business in particular is driven by the AI demand. and a good part of that equipment business in particular is driven by the ai demand We have a strong guide getting into Q4 as well at $295 million. we have a strong guide getting into q4 as well at $295 million Specialty industrial, like I said, it's got a bunch of segments within it. specialty industrial like i said it's got a bunch of segments within it GDP is a good measure to track that. gdp is a good measure to track that PMI index is a good measure to go by. pmi index is a good measure to go by We are stabilized. we are stabilized It's still below what it used to be, but we started the year at about $270 million-$275 million a quarter. it's still below what it used to be but we started the year at about $270 million-$275 million a quarter We are happy to exceed, get to this 284 level, 280 level in Q3, Q4. It is really tied to mostly auto industry and general industrial, which are the two bigger segments within that. Again, like I said, PMI has slightly started ticking above 50 now. We hope as it gets to its more normal levels, we will start seeing much more profitability in cash generation. To touch upon our capital allocation strategy, we are expanding our CapEx to get closer to our customers, mostly and to modernize our manufacturing facilities. We are building a new plant in Malaysia, and we have acquired land and built a chemistry plant in Thailand. We also have some activities going on in China and in Europe and Romania. We are happy to exceed, get to this 284 level, 280 level in Q3, Q4. we are happy to exceed get to this 284 level 280 level in q3 q4 It is really tied to mostly auto industry and general industrial, which are the two bigger segments within that. it is really tied to mostly auto industry and general industrial which are the two bigger segments within that Again, like I said, PMI has slightly started ticking above 50 now. again like i said pmi has slightly started ticking above 50 now We hope as it gets to its more normal levels, we will start seeing much more profitability in cash generation. we hope as it gets to its more normal levels, we will start seeing much more profitability in cash generation To touch upon our capital allocation strategy, we are expanding our CapEx to get closer to our customers, mostly and to modernize our manufacturing facilities. to touch upon our capital allocation strategy we are expanding our capex to get closer to our customers mostly and to modernize our manufacturing facilities We are building a new plant in Malaysia, and we have acquired land and built a chemistry plant in Thailand. we are building a new plant in malaysia and we have acquired land and built a chemistry plant in thailand We also have some activities going on in China and in Europe and Romania. we also have some activities going on in china and in europe and romania Our CapEx tends to be about 4%-5% of our revenue, closer to the 4% range, and that'll continue for one more year, and then it'll get back more to normal levels of 3%-4%. Investing in ourself, investing in supporting the growth of the business and continuity of the business is primary focus. Investing in technology remains our primary focus for capital allocation strategy. The second focus is we pay a modest dividend, about $60 million a year, and strengthening our balance sheet by lowering our leverage. That's going to be our primary focus after the first two for the remaining period of time till we get our debt down to 2x-2.5x net leverage. The debt is nothing new for MKS. We always borrowed money for acquisitions. We borrowed money for the Atotech acquisitions, and we've been paying it down. Our CapEx tends to be about 4%-5% of our revenue, closer to the 4% range, and that'll continue for one more year, and then it'll get back more to normal levels of 3%-4%. our capex tends to be about 4%-5% of our revenue closer to the 4% range and that'll continue for one more year and then it'll get back more to normal levels of 3%-4% Investing in ourself, investing in supporting the growth of the business and continuity of the business is primary focus. investing in ourself investing in supporting the growth of the business and continuity of the business is primary focus Investing in technology remains our primary focus for capital allocation strategy. investing in technology remains our primary focus for capital allocation strategy The second focus is we pay a modest dividend, about $60 million a year, and strengthening our balance sheet by lowering our leverage. the second focus is we pay a modest dividend about $60 million a year and strengthening our balance sheet by lowering our leverage That's going to be our primary focus after the first two for the remaining period of time till we get our debt down to 2x-2.5x net leverage. that's going to be our primary focus after the first two for the remaining period of time till we get our debt down to 2x-2.5x net leverage The debt is nothing new for MKS. the debt is nothing new for mks We always borrowed money for acquisitions. we always borrowed money for acquisitions We borrowed money for the Atotech acquisitions, and we've been paying it down. we borrowed money for the atotech acquisitions and we've been paying it down It's just the discipline of paying it down. That remains our primary focus. Once we get our debt down to more acceptable levels of 2.5x net, we can get into a more broader capital allocation strategy that includes returning cash back to shareholders, if you may, and also inorganic growth support, which is a core part of our strategy. We probably do not need to do any large acquisitions like the ones we have done in the past. The ones that we look at more will be tuck-ins and bolt-ons to our existing core businesses. We did buy back a small amount of stock in Q1 of this year, mostly to offset dilution, and that is very opportunistic. To sum it up, we are in some very secular growth markets as we went through the segments of market we are in. It's just the discipline of paying it down. it's just the discipline of paying it down That remains our primary focus. that remains our primary focus Once we get our debt down to more acceptable levels of 2.5x net, we can get into a more broader capital allocation strategy that includes returning cash back to shareholders, if you may, and also inorganic growth support, which is a core part of our strategy. once we get our debt down to more acceptable levels of 2.5x net we can get into a more broader capital allocation strategy that includes returning cash back to shareholders if you may and also inorganic growth support which is a core part of our strategy We probably do not need to do any large acquisitions like the ones we have done in the past. we probably do not need to do any large acquisitions like the ones we have done in the past The ones that we look at more will be tuck-ins and bolt-ons to our existing core businesses. the ones that we look at more will be tuck-ins and bolt-ons to our existing core businesses We did buy back a small amount of stock in Q1 of this year, mostly to offset dilution, and that is very opportunistic. we did buy back a small amount of stock in q1 of this year mostly to offset dilution and that is very opportunistic To sum it up, we are in some very secular growth markets as we went through the segments of market we are in. to sum it up we are in some very secular growth markets as we went through the segments of market we are in We are very focused on driving profitability and creating value for our shareholders, and we will continue to focus on cash generation and deleveraging and strengthening our balance sheet. As we look at 2026, given the tailwind we have on the top line, given our cost structure and the cash generation and a strengthening balance sheet, we are looking at a very good 2026 as we look ahead. With that, I will stop and take any questions. We are very focused on driving profitability and creating value for our shareholders, and we will continue to focus on cash generation and deleveraging and strengthening our balance sheet. we are very focused on driving profitability and creating value for our shareholders and we will continue to focus on cash generation and deleveraging and strengthening our balance sheet As we look at 2026, given the tailwind we have on the top line, given our cost structure and the cash generation and a strengthening balance sheet, we are looking at a very good 2026 as we look ahead. as we look at 2026 given the tailwind we have on the top line given our cost structure and the cash generation and a strengthening balance sheet we are looking at a very good 2026 as we look ahead With that, I will stop and take any questions. with that, i will stop and take any questions

Speaker 2: Absolutely. If there are any questions, just feel free to raise your hand, and we'll work you into the dialogue. Ram, maybe just a high-level question. As you think about the technology portfolio that you do bring to bear, you checked a lot of boxes as we looked at the diagram around wafer construction or chip construction. How do you differentiate on the technology side versus your peers? Is it breadth, just having the touch points that you do, or just elaborate on that? Absolutely. absolutely If there are any questions, just feel free to raise your hand, and we'll work you into the dialogue. if there are any questions just feel free to raise your hand and we'll work you into the dialogue Ram, maybe just a high-level question. ram maybe just a high-level question As you think about the technology portfolio that you do bring to bear, you checked a lot of boxes as we looked at the diagram around wafer construction or chip construction. as you think about the technology portfolio that you do bring to bear you checked a lot of boxes as we looked at the diagram around wafer construction or chip construction How do you differentiate on the technology side versus your peers? how do you differentiate on the technology side versus your peers Is it breadth, just having the touch points that you do, or just elaborate on that? is it breadth just having the touch points that you do or just elaborate on that

Speaker 1: Absolutely. Keith, do you want to start with that? Absolutely. absolutely Keith, do you want to start with that? keith do you want to start with that

Speaker 3: Sure. I think one of the key things we do is, again, with the breadth of the products that we have, we have close relationships with our customers. What we ultimately do is we solve our customers' hardest problems, as Ram had said earlier. We really do, when those technological changes happen, we are right there with them. We can see it coming with them. We can develop those solutions and enable their equipment to do what it needs to do. I think it is really about customer intimacy, which our broad portfolio enables us to get even closer and to see those inflections coming earlier and develop the solutions that are differentiating in the marketplace. Sure. sure I think one of the key things we do is, again, with the breadth of the products that we have, we have close relationships with our customers. i think one of the key things we do is again with the breadth of the products that we have we have close relationships with our customers What we ultimately do is we solve our customers' hardest problems, as Ram had said earlier. what we ultimately do is we solve our customers' hardest problems as ram had said earlier We really do, when those technological changes happen, we are right there with them. we really do when those technological changes happen, we are right there with them We can see it coming with them. we can see it coming with them We can develop those solutions and enable their equipment to do what it needs to do. we can develop those solutions and enable their equipment to do what it needs to do I think it is really about customer intimacy, which our broad portfolio enables us to get even closer and to see those inflections coming earlier and develop the solutions that are differentiating in the marketplace. i think it is really about customer intimacy which our broad portfolio enables us to get even closer and to see those inflections coming earlier and develop the solutions that are differentiating in the marketplace

Speaker 1: Yeah. Yeah. The differentiation that our R&D does is reflected in the differentiation we bring to our product that provides the stickiness in the business, the price stability, and the margin. The R&D dollars we spend are very well put to use. That's the core strength there. Yeah. yeah Yeah. yeah The differentiation that our R&D does is reflected in the differentiation we bring to our product that provides the stickiness in the business, the price stability, and the margin. the differentiation that our r&d does is reflected in the differentiation we bring to our product that provides the stickiness in the business the price stability and the margin The R&D dollars we spend are very well put to use. the r&d dollars we spend are very well put to use That's the core strength there. that's the core strength there

Speaker 2: Yeah. You mentioned service several times in your overview. How does that mix in with the service revenue streams mix in with those that are going to be more directly tied to CapEx? What's the mix there? Who's trying to change that dynamic? Yeah. yeah You mentioned service several times in your overview. you mentioned service several times in your overview How does that mix in with the service revenue streams mix in with those that are going to be more directly tied to CapEx? how does that mix in with the service revenue streams mix in with those that are going to be more directly tied to capex What's the mix there? what's the mix there Who's trying to change that dynamic? who's trying to change that dynamic

Speaker 1: I'll start, and Keith runs the service business, so he can certainly talk more about it. We are very, very happy with the service component in our business. The acquisition of the Atotech business and the growth of our EMP was primarily focused on driving broader portfolio products to minimize the volatility of semiconductor business, if you may. The service side of our business, including the chemistry, is about 40% of our revenue with very high margins. As that grows, it provides more stability to our overall revenue stream. Keith, feel free to add on anything more you may. I'll start, and Keith runs the service business, so he can certainly talk more about it. i'll start and keith runs the service business so he can certainly talk more about it We are very, very happy with the service component in our business. we are very very happy with the service component in our business The acquisition of the Atotech business and the growth of our EMP was primarily focused on driving broader portfolio products to minimize the volatility of semiconductor business, if you may. the acquisition of the atotech business and the growth of our emp was primarily focused on driving broader portfolio products to minimize the volatility of semiconductor business if you may The service side of our business, including the chemistry, is about 40% of our revenue with very high margins. the service side of our business including the chemistry is about 40% of our revenue with very high margins As that grows, it provides more stability to our overall revenue stream. as that grows it provides more stability to our overall revenue stream Keith, feel free to add on anything more you may. keith feel free to add on anything more you may

Speaker 3: Yeah, yeah. I think the service business in total is about $500 million of that kind of 40% that you said. It has been growing. Obviously, as the install base grows, as we sell more equipment, that service business naturally grows. We have really focused on engaging the end users who are using the products and our OEM partners and finding ways to add more value even in the aftermarket. We have been able to do that and kind of outpace the growth on the service side and bring more value, leading to increased margins as well. Yeah, yeah. yeah yeah I think the service business in total is about $500 million of that kind of 40% that you said. i think the service business in total is about $500 million of that kind of 40% that you said It has been growing. it has been growing Obviously, as the install base grows, as we sell more equipment, that service business naturally grows. obviously as the install base grows as we sell more equipment that service business naturally grows We have really focused on engaging the end users who are using the products and our OEM partners and finding ways to add more value even in the aftermarket. we have really focused on engaging the end users who are using the products and our oem partners and finding ways to add more value even in the aftermarket We have been able to do that and kind of outpace the growth on the service side and bring more value, leading to increased margins as well. we have been able to do that and kind of outpace the growth on the service side and bring more value leading to increased margins as well

Speaker 1: We have service associated with both semiconductor, photonics, and MSD. To Keith's point, as the install rate base increases, the service revenue potential is going to increase. The profitability of that segment is very attractive for us. We have service associated with both semiconductor, photonics, and MSD. we have service associated with both semiconductor photonics and msd To Keith's point, as the install rate base increases, the service revenue potential is going to increase. to keith's point as the install rate base increases the service revenue potential is going to increase The profitability of that segment is very attractive for us. the profitability of that segment is very attractive for us

Speaker 2: Yeah. You made mention at the end, you feel good about where you sit heading into 2026 around growth. How should we be thinking about MKS growth in the context of WFE, WFE growth as a barometer for how fast that you could grow? Yeah. yeah You made mention at the end, you feel good about where you sit heading into 2026 around growth. you made mention at the end you feel good about where you sit heading into 2026 around growth How should we be thinking about MKS growth in the context of WFE, WFE growth as a barometer for how fast that you could grow? how should we be thinking about mks growth in the context of wfe wfe growth as a barometer for how fast that you could grow

Speaker 1: Yeah. I can, again, start, and Keith can talk more about the WFE impact to our business. Where we sit, we are very happy with the level of execution and the focus we have had in deleveraging and strengthening our balance sheet. We are happy with the investments in the portfolio that we have and the general shift in the discussion that we are having with you folks from just semiconductor to electronics and packaging as well. The acquisition that we did a few years ago is really hitting its stride now. We are seeing it in the top line, and AI is going to only take it forward. When you look forward into the years ahead, we think we are in a very well position to both drive top line and profitability. That is what I meant. WFE, you can talk more to it. Yeah. yeah I can, again, start, and Keith can talk more about the WFE impact to our business. i can again start and keith can talk more about the wfe impact to our business Where we sit, we are very happy with the level of execution and the focus we have had in deleveraging and strengthening our balance sheet. where we sit we are very happy with the level of execution and the focus we have had in deleveraging and strengthening our balance sheet We are happy with the investments in the portfolio that we have and the general shift in the discussion that we are having with you folks from just semiconductor to electronics and packaging as well. we are happy with the investments in the portfolio that we have and the general shift in the discussion that we are having with you folks from just semiconductor to electronics and packaging as well The acquisition that we did a few years ago is really hitting its stride now. the acquisition that we did a few years ago is really hitting its stride now We are seeing it in the top line, and AI is going to only take it forward. we are seeing it in the top line and ai is going to only take it forward When you look forward into the years ahead, we think we are in a very well position to both drive top line and profitability. when you look forward into the years ahead we think we are in a very well position to both drive top line and profitability That is what I meant. that is what i meant WFE, you can talk more to it. wfe you can talk more to it

Speaker 3: Yeah. Again, I highlighted the kind of history of WFE growth and the forecast of it going forward from the industry analysts. MKS has a long history of outperforming WFE. We've outperformed WFE about 200 basis points. We've done that over the last several decades. Everything we see going forward, we should be able to continue to outperform WFE by about that 200 basis points. Yeah. yeah Again, I highlighted the kind of history of WFE growth and the forecast of it going forward from the industry analysts. again i highlighted the kind of history of wfe growth and the forecast of it going forward from the industry analysts MKS has a long history of outperforming WFE. mks has a long history of outperforming wfe We've outperformed WFE about 200 basis points. we've outperformed wfe about 200 basis points We've done that over the last several decades. we've done that over the last several decades Everything we see going forward, we should be able to continue to outperform WFE by about that 200 basis points. everything we see going forward we should be able to continue to outperform wfe by about that 200 basis points

Speaker 2: Okay. What about the margin profile, thinking about the near-term margin profile, the puts and takes on gross margin given where the business is currently trending? Okay. okay What about the margin profile, thinking about the near-term margin profile, the puts and takes on gross margin given where the business is currently trending? what about the margin profile thinking about the near-term margin profile the puts and takes on gross margin given where the business is currently trending

Speaker 1: Yeah. So if you look at 2024, all the way up to actually Q1 of 2025, we were well ahead of 47%. We finished Q1 at 47.4%. Since then, two things happened. One is we started seeing the impact of tariffs starting Q2. And we started seeing the impact of mix, the equipment side of the chemistry business that I talked about earlier. We started seeing the impact of that. That equipment business is lower than the corporate average margins, if you may. But it's a good problem to have because it guarantees future very high margin chemistry sales. Among our competition, the main competition we have are. We are the only ones who sell the equipment. That model of equipment plus chemistry works very well for us because more equipment out there, it's more chemistry for us. Yeah. yeah So if you look at 2024, all the way up to actually Q1 of 2025, we were well ahead of 47%. so if you look at 2024 all the way up to actually q1 of 2025 we were well ahead of 47% We finished Q1 at 47.4%. we finished q1 at 47.4% Since then, two things happened. since then two things happened One is we started seeing the impact of tariffs starting Q2. one is we started seeing the impact of tariffs starting q2 And we started seeing the impact of mix, the equipment side of the chemistry business that I talked about earlier. and we started seeing the impact of mix the equipment side of the chemistry business that i talked about earlier We started seeing the impact of that. we started seeing the impact of that That equipment business is lower than the corporate average margins, if you may. that equipment business is lower than the corporate average margins if you may But it's a good problem to have because it guarantees future very high margin chemistry sales. but it's a good problem to have because it guarantees future very high margin chemistry sales Among our competition, the main competition we have are. among our competition the main competition we have are We are the only ones who sell the equipment. we are the only ones who sell the equipment That model of equipment plus chemistry works very well for us because more equipment out there, it's more chemistry for us. that model of equipment plus chemistry works very well for us because more equipment out there it's more chemistry for us The attach rate after five years, we say, is about 85%. In the earlier years, it is higher than that. That is very attractive for us. That mix did hurt our overall gross margin in the short term. Regarding tariffs, we had 115 basis points of impact in Q2, without which we would have been close to 48%. We had 80 basis points of impact in Q3. We would have been 47.4% without that. As of Q4, we have offset the impact of tariffs dollar for dollar. However, just because of math, because we do not mark up those tariffs as we pass through what we need to pass through, there will be a 50 basis points impact to the gross margin, although no impact to the dollars itself. We will offset that. The attach rate after five years, we say, is about 85%. the attach rate after five years we say is about 85% In the earlier years, it is higher than that. in the earlier years it is higher than that That is very attractive for us. that is very attractive for us That mix did hurt our overall gross margin in the short term. that mix did hurt our overall gross margin in the short term Regarding tariffs, we had 115 basis points of impact in Q2, without which we would have been close to 48%. regarding tariffs we had 115 basis points of impact in q2 without which we would have been close to 48% We had 80 basis points of impact in Q3. we had 80 basis points of impact in q3 We would have been 47.4% without that. we would have been 47.4% without that As of Q4, we have offset the impact of tariffs dollar for dollar. as of q4 we have offset the impact of tariffs dollar for dollar However, just because of math, because we do not mark up those tariffs as we pass through what we need to pass through, there will be a 50 basis points impact to the gross margin, although no impact to the dollars itself. however just because of math because we do not mark up those tariffs as we pass through what we need to pass through, there will be a 50 basis points impact to the gross margin although no impact to the dollars itself We will offset that. we will offset that We are very confident of getting back to our mid-40s margin, 47%+, with just ongoing operational excellence programs that we are running and once we get to a more normalized mix. We are very confident of getting back to our mid-40s margin, 47%+ , with just ongoing operational excellence programs that we are running and once we get to a more normalized mix. we are very confident of getting back to our mid-40s margin 47%+ with just ongoing operational excellence programs that we are running and once we get to a more normalized mix

Speaker 2: One thing that we've been asking all of the companies here is to try to get some sense of as to how real is AI, right, and how you may be applying it. Yes, there's a lot of push to make it external customer, work it into customer solutions. Internally, I'm curious if you have any areas or examples that you could point to where you've applied AI tools and are driving some efficiencies or savings that you'd call out. One thing that we've been asking all of the companies here is to try to get some sense of as to how real is AI, right, and how you may be applying it. one thing that we've been asking all of the companies here is to try to get some sense of as to how real is ai right and how you may be applying it Yes, there's a lot of push to make it external customer, work it into customer solutions. yes there's a lot of push to make it external customer work it into customer solutions Internally, I'm curious if you have any areas or examples that you could point to where you've applied AI tools and are driving some efficiencies or savings that you'd call out. internally i'm curious if you have any areas or examples that you could point to where you've applied ai tools and are driving some efficiencies or savings that you'd call out

Speaker 1: So internally, you mean within MKS or top line? So internally, you mean within MKS or top line? so internally you mean within mks or top line

Speaker 2: Internally. Internally. internally

Speaker 1: Internally. I can start and Keith, if you can think of anything specific too. We are early in our adoption of AI. We have teams of specialists in AI that's working with us. We are trying to train more experts to be embedded in the functions, if you may, functional leaders. Within finance, for example, there's a lot that AI can do, and we are early stages. We are scratching the surface. There's things we can do in R&D. That is going to make our OpEx, in particular, a lot more scalable as we use more of that. We are in very early innings right now. Anything specific you want to add? No. Internally. internally I can start and Keith, if you can think of anything specific too. i can start and keith if you can think of anything specific too We are early in our adoption of AI. we are early in our adoption of ai We have teams of specialists in AI that's working with us. we have teams of specialists in ai that's working with us We are trying to train more experts to be embedded in the functions, if you may, functional leaders. we are trying to train more experts to be embedded in the functions if you may functional leaders Within finance, for example, there's a lot that AI can do, and we are early stages. within finance for example there's a lot that ai can do and we are early stages We are scratching the surface. we are scratching the surface There's things we can do in R&D. there's things we can do in r&d That is going to make our OpEx, in particular, a lot more scalable as we use more of that. that is going to make our opex in particular a lot more scalable as we use more of that We are in very early innings right now. we are in very early innings right now Anything specific you want to add? anything specific you want to add No. no

Speaker 2: Yeah. Did you effort to delever the balance sheet to your target level? Have you put a timeline on when you think you could get to 2.5? Yeah. yeah Did you effort to delever the balance sheet to your target level? did you effort to delever the balance sheet to your target level Have you put a timeline on when you think you could get to 2.5? have you put a timeline on when you think you could get to 2.5

Speaker 1: We haven't put a timeline. We are very focused on getting to 2.5x. And our past actions of prepayments, we've been putting money where our mouth is. The wild card or the unknown there is really the top line. At our current muted top lines, if you may, 2023, 2024 was very flat. We've been able to manage about $500 million of payments around that every year, prepayments and mandatory payments together. But as that top line comes back to more normal levels, we can certainly accelerate that. So that's the bit of the unknown. Plus anything else we can do from a portfolio point of view or to accelerate that, we will look at. So we haven't given a timeline, but we are confident that we'll get to the levels we want to. And like I said, it's not uncommon for MKS. We haven't put a timeline. we haven't put a timeline We are very focused on getting to 2.5x . we are very focused on getting to 2.5x And our past actions of prepayments, we've been putting money where our mouth is. and our past actions of prepayments we've been putting money where our mouth is The wild card or the unknown there is really the top line. the wild card or the unknown there is really the top line At our current muted top lines, if you may, 2023, 2024 was very flat. at our current muted top lines if you may 2023 2024 was very flat We've been able to manage about $500 million of payments around that every year, prepayments and mandatory payments together. we've been able to manage about $500 million of payments around that every year prepayments and mandatory payments together But as that top line comes back to more normal levels, we can certainly accelerate that. but as that top line comes back to more normal levels we can certainly accelerate that So that's the bit of the unknown. so that's the bit of the unknown Plus anything else we can do from a portfolio point of view or to accelerate that, we will look at. plus anything else we can do from a portfolio point of view or to accelerate that we will look at So we haven't given a timeline, but we are confident that we'll get to the levels we want to. so we haven't given a timeline but we are confident that we'll get to the levels we want to And like I said, it's not uncommon for MKS. and like i said it's not uncommon for mks It's just that the last borrowing was larger, and the market didn't get the top line where we needed it to be. It has taken a little longer. The discipline to get it back to acceptable levels is very critical for us. We've always done that. It's just that the last borrowing was larger, and the market didn't get the top line where we needed it to be. it's just that the last borrowing was larger and the market didn't get the top line where we needed it to be It has taken a little longer. it has taken a little longer The discipline to get it back to acceptable levels is very critical for us. the discipline to get it back to acceptable levels is very critical for us We've always done that. we've always done that

Speaker 2: Yeah. Just on the specialty industrial segment, you mentioned that has crept up as the years unfolded from where you began the year. Are you seeing any green shoots of more substantive improvement in that part of the business, any particular area? Yeah. yeah Just on the specialty industrial segment, you mentioned that has crept up as the years unfolded from where you began the year. just on the specialty industrial segment you mentioned that has crept up as the years unfolded from where you began the year Are you seeing any green shoots of more substantive improvement in that part of the business, any particular area? are you seeing any green shoots of more substantive improvement in that part of the business any particular area

Speaker 1: Not really. I think the two, we've seen slight growth in aerospace and defense and in life health sciences, if you may. The two big segments there are general industrial and auto. As you all know, in the auto news, the last one was slightly better, but not a meaningful impact yet. Unless we see something there, hopefully the interest rate cuts will drive further demand. Unless we see something meaningful in those two segments, factory build, and we have lasers that go into the factories, that's the specialty industrial component there. The business related to the auto, we won't see a step change from where we are. Not really. not really I think the two, we've seen slight growth in aerospace and defense and in life health sciences, if you may. i think the two we've seen slight growth in aerospace and defense and in life health sciences if you may The two big segments there are general industrial and auto. the two big segments there are general industrial and auto As you all know, in the auto news, the last one was slightly better, but not a meaningful impact yet. as you all know in the auto news the last one was slightly better but not a meaningful impact yet Unless we see something there, hopefully the interest rate cuts will drive further demand. unless we see something there hopefully the interest rate cuts will drive further demand Unless we see something meaningful in those two segments, factory build, and we have lasers that go into the factories, that's the specialty industrial component there. unless we see something meaningful in those two segments factory build and we have lasers that go into the factories that's the specialty industrial component there The business related to the auto, we won't see a step change from where we are. the business related to the auto we won't see a step change from where we are

Speaker 2: Yeah. Is that a global business, or is it exposed to any particular region? Yeah. yeah Is that a global business, or is it exposed to any particular region? is that a global business or is it exposed to any particular region

Speaker 1: Nope, 100% global. Nope, 100% global. nope 100% global

Speaker 2: Okay. Any region stand out as maybe better than another? I'm thinking maybe North America might be better than Europe, but. Okay. okay Any region stand out as maybe better than another? any region stand out as maybe better than another I'm thinking maybe North America might be better than Europe, but. i'm thinking maybe north america might be better than europe but

Speaker 1: No, we have businesses spread all over the world. We have local for local manufacturing all over the world. I mean, if you look at MKS, our China exposure is about lower 20%, 22%. Most of that is related to the chemistry and chemistry business, if you may. The China manufacturing is all local, done in China. We have factories in Europe, and we have factories in North America. No, we have businesses spread all over the world. no we have businesses spread all over the world We have local for local manufacturing all over the world. we have local for local manufacturing all over the world I mean, if you look at MKS, our China exposure is about lower 20%, 22%. i mean if you look at mks our china exposure is about lower 20% 22% Most of that is related to the chemistry and chemistry business, if you may. most of that is related to the chemistry and chemistry business if you may The China manufacturing is all local, done in China. the china manufacturing is all local done in china We have factories in Europe, and we have factories in North America. we have factories in europe and we have factories in north america

Speaker 2: Very good. Again, maybe last call, if there's any questions before we wrap here. No? We'll call it then. Thank you very much, Ram. Very good. very good Again, maybe last call, if there's any questions before we wrap here. again maybe last call if there's any questions before we wrap here No? no We'll call it then. we'll call it then Thank you very much, Ram. thank you very much ram

Speaker 1: Thank you. Thank you all. Thank you. thank you Thank you all. thank you all

Speaker 3: Appreciate it. Good to see you. Appreciate it. appreciate it good to see you Good to see you. appreciate it good to see you