MKS Inc. (MKSI) Earnings Call Transcript & Summary

Great. Good morning, everyone. Welcome to the second day Of DB Tech Conference. I am Sidney Ho. I cover semiconductor, semi-cap equipment and IT hardware at Deutsche Bank. So the next company we have is MKS Instruments. MKS is a key supplier of components and subsystems to the semiconductor equipment market and also a strong presence in other advanced markets. MKS also has -- is expected to grow its Advanced Markets business with the pending acquisition of specialty chemical company called Atotech. Today, we're very pleased to have CFO, Seth Bagshaw, with us. Welcome, Seth.

Thank you, Sidney. Good morning.

Good morning. [Operator Instructions] So with that out of the way, maybe I'll just start off with a few questions on the near-term market on the semiconductor side first, obviously. So the demand environment is -- has been pretty strong right now -- for some time now. Can you give us an overview of what trends you are seeing in these markets? And how you think about the sustainability of this demand? What's your current view of WFE this year and maybe next year after a very strong, I guess, first half of this year?

Yes. It's a great question, Sidney. Thank you. Yes. We said in the Q3 -- Q2 call, sorry, that we had a very strong demand environment. Obviously, it's gone on for a number of quarters here, and we're exposed to all those major trends. So we're pretty happy with the demand environment. And we see that really strong today as well. No real change. You can probably talk to our major customers and see what they say, but it is pretty much consistent with kind of the very strong demand environment. What's a little bit different is -- and I've been in the space for about 20 years now. If you go back way back when it was kind of a PC day cycle, every 3 years, you kind of have CapEx spending. But when you kind of fast forward to 2021, what's different is it's much more broad-based demand environment. And no surprise, you look at where chips are being used today. It's not just PCs, obviously, smartphones. That's a big driver for sure. But the industrial applications is much more broad-based and much more diversified. And you look at some of the auto industry, where they have difficulty in making production levels, maintaining those production levels because they have chip shortages. So it's much more broad-based, much more consumer based and much healthier demand environment, if you will, as well. So diversity is really important and very well understood and very important for us. And you look at also kind of Moore's Law. So you can -- as you well know, when you look at the complexity today to build chips, it's much more complex today than it has ever been in the past. We have 3D NAND chip demand drivers, which add a lot of capital intensity, a lot of unique applications. We benefit in that as well. So that scaling challenges, which has been there forever is the work that's more challenging today that drives more capital intensity and more demand for MKS equipment. So again, more broad-based demand, more complex miniaturization requirements. The build chips today that's all been very [ special ] for MKS in going forward as well. Looking forward to 2022, we tend not to get into predicting WFE spending going out in the future. But obviously, our customers have been very vocal about the strong demand environment. We would echo that for sure, what we're seeing in our sales channels. And again, all those long-term drivers I mentioned remain in indefinite future going forward as well. So we're seeing a pretty strong environment right now, certainly exiting this year. And then when you look at the Advanced Markets piece of our business, which is, again, about 40% of our overall revenue. Those demand drivers there as well are very robust. They have a long-term tail. We're very thoughtful on Analyst Day back in December, given kind of long-term growth targets in Advanced Markets being well above GDP on an average basis. So actually feeling really good about the demand environment, the overall drivers of all the different segments, kind of where we're positioned in the marketplace. We've gained share last year in the RF power segment. It's going to obviously drive growth going forward as well. So again, a pretty strong environment and we're pretty well positioned going forward.

Excellent. I'd love to drill into Advanced Markets a little bit later. But on the -- just staying with the semi side for a little bit, supply constraints have been a factor for you guys in limiting your revenue upside in the second quarter. And it sounds like it's going to continue to be a headwind in the third quarter. Can you give us an update on what you're seeing in your supply chain? And how do you factor these constraints in your third quarter revenue guidance?

Yes. Great question. Yes. So we have -- we think we have very strong operational excellence in our supply chain management, and manufacturing locations. And we've met the ramp quite successfully in this very strong demand environment. So in the third quarter guidance, what we said in the call, it's still applicable today is we've kind of managed pretty well with supply constraints, again, through COVID-19 and through any other ramp headwinds. But really what's happened in the July time frame was kind of a COVID outbreak in Malaysia and some developing countries, which we don't have an MKS footprint but supply chain. Some components are sourced in Malaysia, for example. So we saw that kind of in that second to third week time frame. It's a pretty hard shutdown in that part of the world. So that was kind of our thought process in getting the second -- the third quarter guidance. And to give you a sense of kind of what we think the impact will be in Q3 was we had $750 million of revenue in the second quarter. And we guided midpoint of $720 million plus and minus $30 million. And in that $720 million, there's a little bit of a -- we acquired a company called Photon Control, is probably $10 million or $15 million of revenue there in Q3, not Q2. And then in the flex PCB market, there's normal seasonality as well, which would be a slower third quarter. Even given those different dynamics, we feel we've been sequentially up in the third quarter, above the $750 million at midpoint. So it gives you a sense of kind of supply constraints, at least the magnitude we saw we gave our guidance. I think the teams are working through all that. Everybody -- obviously, we are motivated, the supply chain, the countries we reside in are also motivated to kind of make the production environment improve, and I think people are kind of making progress there. But it's really hard to say with all the COVID outbreaks and kind of the brush fires occurring around the world, what the net impact is going to be. We'll be able to give a little more update for sure. Obviously, we got the third quarter earnings call, that third week in October. But there's a lot of good people working at it. We're really pleased with supply chain, how well they work with us, how they give us the opportunity to -- I would say, first in line, they give an opportunity to kind of make sure we get the right components we need to keep our customers up and running as well.

Great. Great. Thanks for that update. So if I look at the semi business again, I know you guys have a history of outgrowing WFE. Of course, your customers have a better view about the end market demand and whatnot. But historically, you've been outgrowing the WFE market through the cycle. So in 2020, your semis significantly outgrew the WFE market. And in the first half of this year, it looks like you have also grown in line, if not more than the WFE. As you look forward, if there is no supply constraints, should we think of your business continue to outgrow the market? Or are you at a point in the cycle that you may be -- you may have a different growth trajectory as your customers right now?

Yes. Yes, it's a great question. So we've been pretty transparent and pretty vocal about our growth through the cycle. So again, to your point, is we did mention in the Analyst Day in December, our plan, our goal and our history certainly demonstrates that we would outgrow WFE by at least 200 basis points to the cycle. We define that kind of over the long term like a 5-year period. You have obviously ups and downs in a particular cycle. We still feel that's exactly our view today, no change in that. We've had share gains last year to your point in critical areas. So that overachievement over the long-term in the cycle, we feel, again, that's our view today. I feel very good about that. When you look in certain parts of the cycle, what will happen any short -- you can have different variations in the short term. But typically, when you go through a ramp environment, our customers are resizing the inventory level. So we'll probably be a little bit -- obviously, we'll overachieve for that reason. And then when you get to a slowdown in the cycle, which we're not in, obviously, you'll see a little bit of a headwind because some of that inventory sizing of the customers would drive down our order rates. So usually you have a little uptick above -- extra above market on upside and slow down on downside. But through the cycle, 200 basis points is still how we look at it. So no change there in our key -- the way we do that is looking at the inflection points in the marketplace, working with key customers, be really critical to our applications, the things we're really good at doing. We've got a very strong presence in the Korean ecosystem with the device -- equipment manufacturers as well as device manufacturers. And again, we have a long-term play in our market share gains. And we, again, have gained quite a bit of share last year in calendar year 2020, even using external market share data to validate that, we've well overachieved on share gains as well.

Great. That's a good segue in the next question. If I look out the next few years, what are the biggest opportunities for you to outgrow the WFE market? Obviously, earlier, you mentioned RF power. It seems like that's the 1 big area. Maybe help us understand the opportunities there in terms of market size, design win activities. And when will you see those design wins turn into revenue? And other than RF power, what are the other areas that you're most excited about?

Yes. So in the RF -- I'll take RF power first, obviously. So we had -- we saw an opportunity many years ago, probably talking 4 years ago to provide technology and solutions to the RF power segment of our business in 3D NAND, high etch -- high aspect ratio -- high aspect etch step, if you will. And so we saw an opportunity there, work with a key customer. We invested pretty heavily in that opportunity. We brought engineers on board, again, work closely with our end customer, and we take a long-term view on these design wins. So the goal, obviously, is to get a design win, and then you wait for that design win to end up on a customer tool. And then hopefully, that's adopted in the marketplace to be high volume, tool of record high volume manufacturing. And that's exactly what happened in the RF power segment. So we gained a lot of share last year. We were a distant #2 a number of years ago. We think we're very much neck and neck #1 in that segment. And that's a playbook we will play over and over again. We will look -- we have a unique way of looking at the market. We've got a group of CTOs across all our product groups. They have different views on the semi market. They collaborate well together, and we try to see around corners to see where the park is going to be and make those investments today. The R Power is a great example. Then we gained share in direct pressure and other segments as well last year as we outlined in our Q2 call. So that's kind of how we look at and how we focus on design wins going forward. When you look at kind of the next areas that are pretty intriguing for us to kind of fit those categories. If you look at what we call world-class optics. So within our Light and Motion division, we provide optics that are used in the semi industry. And so we're investing pretty heavily in that piece of our business. We did mention a number of design wins in the last couple of quarters. Really, the secret sauce there is obviously capacity. It's a little more capital-intensive business, but the coatings and how they are used is kind of where the expertise comes in place for Light and Motion division. And so we mentioned a number of design wins. In terms of becoming revenue, that could take 18 to 36 months. We've got a pretty good view of -- I think that will be a very compelling opportunity going forward. We'll kind of wait and see as those products get developed or get into the high-volume manufacturing environment with our end customers to be more transparent, if you will, more -- give you more numbers, if you will, in kind of design wins to create revenue. And then you look at ALD, we have critical ozone applications. ALD is obviously an area we're heavily investing in as well. So you've RF power, you've got ALD. We've got world-class optics. And then the general cadence we always do across the whole portfolio to kind of again get more design wins and work with end customers. So that's kind of the areas we're kind of looking at right now in a semi world.

Great. Great. Thanks for that. Before we move on to other advanced markets, I want to address one of the inbound questions. Do you have an update on any new export restrictions put forward by the Department of Commerce is -- other than what we already had before?

No. I have no -- nothing I've heard of recently that we haven't already kind of incorporated in our thought process. So no, I've really no real update that I'm aware of at this point.

Okay. Perfect. Well, let's move on to the other Advanced Markets. Maybe just to level set, how should we think about the end market exposure in that segment? What are the areas that you expect to see the strongest growth over the next few years? And what are the areas that we should think of as a steady business?

Yes. Yes, good question. So in the Advanced Markets, we look at a couple of big, big buckets. And the ones I'll say are more the -- I'll set the steady ones first, the ones that are kind of GDP-related life and health sciences, research and defense. There's some general industrial in there as well. And those are pretty good. They're good markets because they are pretty steady. We do get paid for the solutions that we provide to those customers. The margins are equal to the corporate average, which is good. And we're well positioned there in those markets. The area that we look at in the Advanced Markets has probably the biggest growth is Advanced Electronics. And that's a number of areas. If you look at PCB manufacturing. We're strong in the flex PCB market. Obviously, within that, the 5G smartphone adoption, we believe [ it creates ] a 30% flex content. So that will be a growth driver in the future for us as well. Within that division, we also have the HDI market, where with a $500 million greenfield market, we have a product that at least 1.5 year -- almost 2 years ago now that has a compelling cost of ownership, it's a smaller footprint. It's a lighter tool, and we're gaining traction and market design wins as well as some high-volume manufacturing applications. And that's going to be probably a multiyear play for us to get to that market, but we're pretty well positioned there. And then you look at kind of the pulsed laser applications, the -- is to develop these pulsed laser tools, the lower cost of ownership, the higher throughput, you tend to open up new applications that even you can't think of today. So in the pulsed laser, you [ pulse laser 1 billion times ] a second or more, very high precision, they create applications that can't be done any other way. It can be done with a drill or a saw, they're really done with, again, these pulsed laser applications. So we think that segment is probably going to grow kind of double-digit CAGR from a 5-year period from, say, 2020 to 2025. So that's the bigger growth area in Advanced Markets. And then again, the life and health sciences, research and defense and general industrial, more than GDP kind of a steady level, if you will, going forward. If you look at Atotech, it's another different growth driver for us as well. It brings in about $4 billion TAM in the chemistry market. And Atotech is very well positioned. It has very good cost relationships within the electronic piece of the business, which is probably the high growth opportunities and also general metal finishing. So again, the -- really the areas I would say, has the bigger opportunity that Advanced Electronics piece where you're providing these technologies for pulsed lasers and advanced chemistries as well to enable a whole new applications going forward.

Got it. So a couple of follow-up questions. One is how big is Advanced Electronics within the Advanced Markets? I'll start with that.

I think, David, it's probably in that 30% range.

Yes. In -- for 2020, if you look at our Analyst Day, we had a pie chart, and you can see Advanced Electronics was about 1/3 of Advanced Markets in 2020. It was...

Okay. So 1/3. Got it. So roughly it's 1/3 of the business, grows double-digit revenue CAGR. And the other 2/3 that's going to be GDP like. So over time, that mix is going to help the overall growth rate. Got it. If I look at just the HDI side, obviously, something that you guys have invested for a number of years, have talked about for a number of years, and you talked about is a $500 million market. Can you help us understand a little bit more on the competitive dynamics? And what is a realistic revenue target over the next 1 to 2 years? I understand it takes some time for that to ramp up.

Yes. Yes, it's a great question. So it's about $500 million market, growing probably high single digits on a normalized basis. And in that market, there's really 2 other competitors. The biggest one probably has about, we believe about 70% of the market, and they're the market leader for sure. And then another company has the balance, a much smaller company that's owned by a PE company out of Asia. And so it was an opportunity that, frankly, the -- before we acquired ESI in 2019, that's a market that they had looked at pretty heavily, and have developed a tool to kind of release the marketplace to kind of gain traction. I think I mentioned earlier on, the tool has higher throughput than the leading competitive tool out there. It's a much smaller footprint, which helps when you have a manufacturing footprint in Asia, we're trying to optimize the footprint. It's actually quite a bit lighter. It's a whole different architecture, a different technology that makes it a much lighter, substantially lighter, probably 80% lighter tool, single or multiple floors in Asia as well. So that market we're pretty -- we've walked this quite a bit in the last several quarters. We had a number of -- we start to kind of identifying the major customers in the marketplace. We know all those individuals. And then we kind of rank, start with demo applications at our site and then demo tools at the customer site, and then we get into high-volume manufacturing wins. We've mentioned a few of those high-volume manufacturing wins in the last couple of earnings calls. So we're gaining traction there. Our view in terms of share gains is the probably the multiyear period of 5% to 10% share gains kind of we're targeting. Our goals are probably more aggressive internally for sure. But I think that's kind of the right way of thinking about that market. We are also already looking at the next-generation HDI tool in the marketplace. Again, we're reinvesting quite heavily and kind of staying ahead of the technology curve in the HDI market. So compelling opportunity. It's one of the critical theses we had for acquiring ESI. And the team has been very focused and has some really good traction in certain areas and design wins in certain areas. So again, I think that 5% to 10% market share over multiyear period is kind of how we think about at this point.

Great. Maybe let's move on to the Atotech announcement. Obviously, a lot of audience here are very interested in that. So it's been a very eventful year for you guys. You started off with bidding for a different company, and then you end up bidding quickly after that to -- for the Atotech. Can you maybe talk about why you walk away from the other deal? And why it made Atotech an attractive market -- a target now but not before the other bid?

Yes. Sure. So we've got a really large pipeline of acquisitions. We've been a very acquisitive company over the years. That's kind of how we built our portfolio. So I'd say that because I wouldn't view any transaction we get into is kind of unique -- maybe unique from the outside because you don't have the visibility to our pipeline, but it's not unique for us. We've got a pretty broad-based view. So Atotech is something we looked at for quite a while. To answer your question, Coherent was the one that was kind of front and center for timing-wise. And we like that opportunity because, obviously, it's got a very good laser portfolio in the areas we like and Coherent was kind of laser-annealing which they're very good technology and very high share, and I think they're very difficult to dislodge. So that would be something we would like to drive the portfolio. And then the pulsed laser market I mentioned before is something that we're investing in pretty heavily. And we've gained share in that marketplace. So I think that Coherent transaction would have given us a little more ability to service customers a little more quickly. But having said that, we do have a very good friends in the laser market, both in the pulsed laser piece and then the whole ecosystem we provide, again, power meters and beam profiles. So we're going to grow those organically. We can't do an acquisition. We think we're well positioned to continue to drive shareholder value, if you will, through investing in that market. So that was our thought process. But if you follow us -- if you follow that whole that M&A story. I joke -- it became a little bit like March madness because after a while, the pricing got pretty heavy -- or pretty high, if you will. And we're pretty disciplined acquirers. So we got to a point we said, look, the valuation, we just didn't see it made sense for us anymore. And again, we've got some organic footprints that we can definitely leverage and grow into. We have traction and momentum as well. So we just felt that it was not the right opportunity for our shareholders and for us. So we decided to obviously kind of [indiscernible] of that bidding process. But Atotech and others have in the pipeline as well. So we did mention briefly, we did acquire a small company in Canada in July called Photon Control, really nice little business, subscale to be a separate public company. A nice little bolt-on will slide nicely into our semi portfolio. And we can really help that team given our breadth and size. So that's always been on the pipeline. So that came in. Then Atotech was one we've known for a number of years. I mentioned earlier that our E&S division has a lot of same customers that Atotech shipped into. Atotech is chemistry, and we do equipment via drilling, if you will. And we think that the interconnects is -- so an Atotech's revenue stream of 2/3 electronics-based. And if you think of the interconnect today being, how do you connect a chip that has Moore's Law and complexity and miniaturization continue being challenges. And then you get to the substrate in Advanced Packaging, that interconnect [Technical Difficulty] those 2 requirements. So to us, the interconnect is the next frontier for miniaturization. We have the drilling capability. We've got an opportunity in the HDI market. The chemistry is underappreciated. The amount of chemistry and technology and [ cust ] interaction to develop the right chemistry to meet the requirements of that market are very, very complicated. Atotech has about, I believe, about 700 odd applications, individuals, sometimes pharma R&D, who are working with customers around the world develop the right chemistry to meet the right requirements. To give you a sense of how important that is, Atotech's margins on U.S. GAAP basis are probably north of 50%. And so that technology is pretty highly valued. So that's probably like that opportunity. It was on a road map for a long period of time. The timing was right. We think it's a compelling opportunity for both stakeholders. And then you look at within Atotech about 1/3 of revenue was general metal finishing. So it's a little more automotive driven, more general industrial. We like that space a lot, too, because the margins are compelling. There's a lot of common technology in electronics side and GMF. There's a lot of cross-polarization there. It's a good, more steady business. It's not probably as high-growth electronics. But it's a well-run business, and there's a lot of opportunity going forward as well. So Atotech for us was not a dramatic pivot. It was sort of, again, in our pipeline for a number of years. But from the outside in, you look at Coherent, the Atotech, its lasers and chemistry, it does look quite different from the outside in. But when you get into, again, that technology and how important it is, the next frontier for miniaturization and complexity, the chemistry side, we believe, will be extremely important, more important even going forward as well.

That's great. So I personally have a lot of conversations with investors after the deal was announced. So I can kind of summarize the investment pushback in the 3 categories, 3 areas. One is why buy a company that is in the PC business, which is generally viewed as very slow growing, a very competitive business. The second one is there a piece of Atotech business that is completely irrelevant to your core business, which you just addressed, the GMF side? And the third one is, what do you know about running a consumable business? And then 1 investor just now reminded me that one of -- some of the pushback is that the Carlyle Group is going to own a piece of this pretty good size of shares of MKS once the deal is closed. So maybe can you address some of these concerns in that order?

Yes. Yes, exactly. So if you look at the -- if you ask me like 15 years ago, the PCB business, I would say, okay, it's -- if you're dipping in bass, it's kind of load tech. It's in like a factory in Asia, and it's nothing -- it's kind of this low-tech environment. But when you look at where, again, interconnects have kind of evolved to and the chemistry required to enable these chips in Advanced Packaging, it is very, very complicated, very difficult to replicate. And I really think that part of the story is underappreciated. So my personal view is when you look at Atotech, the analysts follow that company very well, doing a great job. But when you look at kind of the overlap with the semi industry and enabling opportunity, I don't think that story is necessarily well understood out there. So I think it's going to be a long-term strategy for us to kind of position that. That story to understand it very well. But clearly, those trends are out there, and we feel very strong about that. It's a well-run company and obviously, a good operating model and good market position. When you look at that general metal finishing. Again, it's a market that is about 1/3 of their business. Again, good EBITDA margins, good gross margins. It's more of a steady business. Again, very well run, very well staffed, very well -- they do a great job investing in all parts of their business as well. So we feel good about that. And frankly, even in our Advanced Markets revenue within the core MKS, we have markets look just like that. The general industrial, the GDP like, they make good money, they're steady eddie businesses. Those are good to have in the portfolio. So we actually like that business quite a bit. Then you come back to, can we run a chemistry business. And I'll say this, that team at Atotech is a very strong team, very focused. They've got a track record of performing very well. Our goal working on integration right now. But certainly, our goal is to leverage their capabilities and try to accelerate what they can do. We did the same thing for a Newport Corporation. We acquired that company back in 2016. The view was, it's a laser-based company, a little bit running on neutral, frankly. You're a semi-cap company, what do you guys know about running the lasers? The answer is, we learned, we have some of the same customers, so is overlap there for sure. But we put some of the process in place we had at MKS that really accelerated Newport, cost structure was lower, the growth rates were higher, a very successful company has really overachieved our expectations. And we had an employee meeting at Irvine a couple of years after the acquisition and with all hands meeting. And long story short, great success in the business and we asked the employee base say, who did that? Who made that change in the business? And I'm sure people thought, well, MKS did it, really it's all the same people that Newport had. We just gave them the right tools, the right motivation, made some investments. And Atotech being no different. We're going to keep that team in place. We're going to make sure they remain successful, make sure they remain focused. They're on a separate division. They have right line of sight to John Lee, the CEO. Our Board is very engaged. That team is very engaged. There will be some overlap with the E&S division, having the laser-based capability in the chemistry under 1 research umbrella as a corporate company will add value as well. So we are very bullish about that opportunity. It may seem a little left of center for sure. I think Newport looked the same way, maybe ESI a little bit as well. But we've done this before. We think it's a great asset. We think it's well run. The financial profile just demonstrates how valued they are in the marketplace. So we think we're very -- again, very excited about this opportunity and looking forward to closing in the fourth quarter.

Great. So on the financial side of things, so you just talked about the strategic side. So on the financial side of things, obviously, there's some cost synergies you guys laid it out already. But there seems to be -- to me, it feels like there is more of a revenue synergy, which you guys haven't talked about. Can you maybe walk us through the financial rationale behind the deal?

Yes. Yes, exactly. So right. On the cost side, relatively modest $50 million of cost synergies. And we think that's just going to be normal efficiencies we'll gain as 2 companies, but we want to make sure all the right functions are well staffed and well funded going forward. On the revenue side, I mentioned before, is when you look at the E&S division, which provides that pulsed laser capability to create the [indiscernible], 5,000 [indiscernible] a second, very high precision. The same customers that have the chemistry as well, they'll buy from Atotech. So really having those 2 functions in 1 company. We can kind of compare the chemistry or what you need to provide for chemistry applications, how it interacts with via drilling and having those types of individuals on 1 room to kind of develop a common solution that will drive revenue is kind of an opportunity for us to show in this acquisition. We've not baked that into our models going forward. We do have goals, we have opportunities we're definitely going to pursue. But until we close the transaction, we're a little bit limited in how much we can get into that, obviously, at this point. But again, they're very complementary markets and technologies serving kind of a common market. So I was in a -- may mention this meeting or a prior one, but we were in Berlin last month. And you can see the dialogue between an MKS General Manager in that division and the Atotech General Manager, and they really know the customers, they know the market well. They interact with the same individual. So that's where we're going to get opportunity going forward.

Okay. That's fair. With about a minute left, why don't we talk about the long-term financial model. A lot has happened in the industry since you gave an update on the target in December in the Analyst Day. And obviously, you still have an Atotech deal to close. But how do you think about what has changed since then? And are there any areas of your target model where you think you might outperform or underperform?

Yes. So we said in the model, we had a growth target. We talked about 200 basis points of long term. I think with the share gains you mentioned, we feel very good about that target. Same thing in the Advanced Markets, again, including Atotech for a moment. We think those markets will perform as we expect as well. And then if you look at the operating model, we've mentioned about 50% variable gross margin, 40% to 45% variable operating margin. In the last -- in Q1 and Q2, we did call out on the earnings call, we're actually above that model. So our variable margins exceeded what we told investors back in December. And so part of that is leverage, a little bit of product mix as well. So the model is well intact, and our goal is to always meet or exceed, we tell investors. But I think that the goal we outlined back in December is the right way of looking at it. And then cash generation, if you look at the free cash flow the last couple of quarters, there were records as well. And part of that obviously is volume and how we run the business in terms of profitability. But we're also looking at cash conversion. And so we -- when COVID-19 first came back -- came here in Q1 of 2020. We looked pretty hard at cash collected around the world to make sure that if any customers are slow -- we have to [ slow ] pay, we kind of be ahead of the curve on that. And we actually improved our cash conversion cycle, both on inventory as well as a little bit on DPO, considerably on the AR side as well. So we're really looking at all the pieces of the financial model. What comes back with revenue growth, well intact; the operating model, well intact; cash flow, probably a little better than expected. That's a good thing. We'll continue to drive that going forward as well. And that's part of the MKS DNA culture. And we've been running a pretty -- I think a pretty best-of-breed operating model for a number of years. This team meets, frankly, on a monthly basis to drive profit improvements as well, intact as well and generating good opportunity.

Okay. Great. It's a good place to wrap up. We just run out of time. Thanks again for the time, Seth, and forgot to mention. Thanks, David. And you guys have a good day.

Okay. Thank you, Sidney.

Sidney, thank you very much.